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Defense Stock Roundup: BA Beats on Q1 Earnings, GD, NOC Miss

Zacks Equity Research

Following dismal Q1 numbers, the major indices of the Aerospace-Defense space performed poorly over the trailing five trading sessions. Notably, the S&P 500 Aerospace & Defense (Industry) index dipped 1.3%, while the Dow Jones U.S. Aerospace & Defense index declined 6% in the aforementioned time period.

In the past week, quarterly results from a number of Aerospace-Defense majors namely, The Boeing Company BA, General Dynamics Corp. GD, Northrop Grumman Corp. NOC and Textron Inc. TXT drew investors’ focus.

Recap of Past Week’s Important Stories

1.    Boeing’s adjusted loss of $1.70 per share for first-quarter 2020 came in narrower than the Zacks Consensus Estimate of a loss of $2.04. The bottom line however deteriorated significantly from earnings of $3.16 in the year-ago quarter.

The company’s revenues amounted to $16.91 billion, which missed the Zacks Consensus Estimate by 1.6%. The top line also plunged 26% year over year.

Adverse impacts of the coronavirus pandemic along with poor 737 deliveries remained the major growth inhibitor for this jet maker’s dismal Q1 performance. Boeing exited the first quarter with cash and cash equivalents of $15.04 billion and short-term and other investments of $0.49 billion (read more: Boeing Q1 Earnings Top, Decline Y/Y on Coronavirus Woes).

2.    General Dynamics’ first-quarter 2020 earnings from continuing operations of $2.43 per share missed the Zacks Consensus Estimate by 1.2%. Moreover, earnings declined 5.1% from the year-ago quarter.

Its revenues of $8,749 million missed the Zacks Consensus Estimate by 5.8% and declined 5.5% year over year. However, the company recorded a total backlog of $85.7 billion, up 23.9% year over year.

As of Mar 31, 2020, General Dynamics’ cash and cash equivalents were $5,330 million compared with $902 million as of Dec 31, 2019 (read more: General Dynamics Q1 Earnings & Revenues Miss Estimates).

3.    Northrop Grumman’s first-quarter 2020 earnings of $5.15 per share missed the Zacks Consensus Estimate by 5%. However, the bottom line rose 1.8% year over year.

The company’s total sales of $8,620 million for the first quarter surpassed the Zacks Consensus Estimate by 1.7% and increased 5.3% year over year. Its total backlog was $64.17 billion at the end of first-quarter 2020, compared with $64.84 billion at 2019-end.

Considering the impact of the COVID-19 pandemic, Northrop Grumman lowered its 2020 revenue and earnings guidance (read more: Northrop Grumman Misses on Q1 Earnings, Cuts '20 EPS View).

4.    Textron’s first-quarter 2020 adjusted earnings of 35 cents per share missed the Zacks Consensus Estimate by 23.9%. Its revenues came in at $2,777 million, lagging the Zacks Consensus Estimate by 4% and also declining 10.7% year over year.

As of Apr 4, 2020, cash and cash equivalents totaled $2,263 million compared with $1,181 million as of Jan 4, 2020.

Its long-term debt was $2,956 million as of Apr 4, 2020, compared with $2,563 million as of Jan 4, 2020 (read more:Textron's Q1 Earnings Miss Estimates, Revenues Fall Y/Y).

Performance

Over the past five trading sessions, the defense biggies put up a dismal show, except Boeing.  Raytheon Technologies lost the most with 3.7% decline in share price, followed by Northrop Grumman.

Over the last six months as well, the industry's performance has also been disappointing, except Lockheed Martin. This time, Boeing lost the most with 60% slump in share price, followed by Textron.

The following table shows the price movement of the major defense players over the past five trading days and during the last six months.

Company Past Week Last 6 Months
LMT -0.96% 1.13%
BA 3.40% -59.15%
GD -1.16% -28.89%
RTX -3.66% -29.79%
NOC -3.32% -6.84%
TXT -3.00% -44.15%
LHX -0.21% -3.83%


What’s Next?

Both Leidos Holdings LDOS and L3Harris Technologies LHX are set to release their first-quarter 2020 numbers on May 5.

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