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Defense Stock Roundup: Q4 Results Impress, RTN, NOC, TDG Earnings Top

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The Zacks Aerospace sector saw Q4 results from 80% of the constituent stocks, as of Feb 6. The earnings beat ratio for these companies were 87.5%, with revenue beat ratio being 75%.

These quarterly numbers must have led the major indices of the Aerospace-Defense space to end in the green over the trailing five trading sessions. Notably, the S&P 500 Aerospace & Defense (Industry) and the Dow Jones U.S. Aerospace & Defense index — gained 3.3% in the aforementioned time period.

Among the past week’s highlights, quarterly results from a number of Aerospace-Defense majors namely Raytheon Company RTN, Northrop Grumman Corp. NOC, TransDigm Group Inc. TDG, Spirit AeroSystems Holdings, Inc. SPR and Honeywell International Inc. HON remained a key area of investors’ focus.

Recap of the Past Week’s Important Stories

1.    Raytheon reported fourth-quarter 2018 earnings per share (EPS) of $2.93 from continuing operations, which outpaced the Zacks Consensus Estimate of $2.89 by 1.4%. Meanwhile, the company’s sales of $7,360 million increased 8.5% on a year-over-year basis.

The company’s bookings totaled $8,447 million compared with $8,541 million in the year-ago quarter, reflecting a drop of 1.1%. Its operating cash flow from operating activities amounted to $3,428 million in 2018 compared with $2,747 million in 2017.

Raytheon currently expects to generate revenues in the range of $28.6-$29.1 billion and earnings from continuing operations of around $11.40-$11.60 per share (read more: Raytheon Q4 Earnings Surpass Estimates, Sales Up Y/Y).

2.    Northrop Grumman reported fourth-quarter 2018 earnings of $4.93 per share, which exceeded the Zacks Consensus Estimate of $4.45 by 10.8%. Total revenues came in at $8,156 million, beating the Zacks Consensus Estimate of $8,109 million by 0.58%.

Northrop Grumman’s cash and cash equivalents as of Dec 31, 2018, were $1,579 million, down from $11,225 million as of Dec 31, 2017. Net cash inflow from operating activities as of Dec 31, 2018, was $3,827 million compared with $2,613 million as of Dec 31, 2017.

Northrop Grumman currently expects to generate revenues in excess of $34 billion in 2019 (read more: Northrop Grumman Beats on Q4 Earnings, Revenues Up Y/Y).

3.    TransDigm Group’s first-quarter fiscal 2019 adjusted earnings came in at $3.85 per share, surpassing the Zacks Consensus Estimate of $3.35 by 14.9%. Net sales amounted to $993.3 million, reflecting year-over-year growth of 17.1% from $848 million registered in the prior-year quarter.

TransDigm ended the first quarter of fiscal 2019 with cash and cash equivalents of $2,337.3 million, up from $2,073 million as of Dec 29, 2018.

Transdigm raised its 2019 financial guidance. Net sales are now anticipated in the range of $4,145-$4,235 million compared with $4,125-$4,215 million anticipated earlier (read more: TransDigm Q1 Earnings Beat Estimates, FY19 View Up).

4.    Spirit AeroSystems reported fourth-quarter 2018 adjusted earnings of $1.85 per share, which trumped the Zacks Consensus Estimate of $1.78 by 4%. In the meantime, total revenues of $1,835 million lagged the Zacks Consensus Estimate of $1,858 million by 1.2%.

Backlog at the end of fourth-quarter 2018 was $48 billion, in line with the prior-quarter’s number. Cash flow from operating activities increased to $769.9 million at the end of 2018 from $573.7 million at the end of 2017.

The company currently expects adjusted earnings per share in the range of $7.35-$7.60 on revenues of $8.0-$8.2 billion (read more: Spirit AeroSystems Q4 Earnings Beat, Revenues Miss).

5.    Honeywell’s adjusted earnings for the fourth quarter of $1.91 per share outpaced the Zacks Consensus Estimate of $1.88. Revenues amounted to $9,729 million, which surpassed the consensus estimate of $9,691 million.

Exiting 2018, Honeywell had cash and cash equivalents of $9,287 million, higher than $7,059 million as of Dec 31, 2017.

Honeywell currently expects its 2019 earnings within the $7.80-$8.10 per share range (read more: Honeywell's Q4 Earnings and Revenues Beat Estimates).

Performance

Over the past five trading sessions, the defense biggies put up a solid show. L3 Technologies gained the most with 9% increase in share price, followed by Boeing.

However, the industry's performance over the last six months has been mixed. While shares of Boeing have gained a solid 15.5%, Textron lost 14%.

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 Last Week Last 6 Months
LMT 3.47% -5.44%
BA 5.07% 15.51%
GD 2.70% -11.56%
RTN 3.06% -4.10%
NOC 4.06% -0.14%
TXT 3.06% -14.23%
LLL 8.95% 2.44%


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