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Defense Stock Roundup: RTX, TDY Beat on Q4 Earnings, BA, GD Miss

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Aparajita Dutta
·6 min read
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In the past five trading sessions, we witnessed results of some of the key defense players who delivered mixed Q4 operational performance. The U.S. stock market’s performance as a whole remained unimpressive after a steep sell-off was observed on Wall Street amid concerns over heightened speculation trading. This might have had a negative impact on the share price performance of the defense stocks as well.  

Therefore, major indices of the defense space, namely the S&P 500 Aerospace & Defense (Industry) index declined 3.9% while the Dow Jones U.S. Aerospace & Defense index dropped 3.6% in the trailing five trading sessions.

In the past week, Hexcel Corp. HXL, Raytheon Technologies RTX, Lockheed Martin LMT, The Boeing Company BA, General Dynamics GD, Teledyne Technologies TDY and Textron TXT reported their quarterly results.

Recap of Past Week’s Important Stories

1.    Hexcel’s fourth-quarter 2020 loss of 18 cents per share came in line with the Zacks Consensus Estimate. The bottom line, however, declined from the prior-year quarter’s earnings.  Net sales totaled $295.8 million, which missed the Zacks Consensus Estimate by 0.4% and witnessed a decline of 47.6% from the year-ago quarter.

Hexcel’s gross margin was 10.3% in the fourth quarter compared with 26% in the year-ago quarter.

As of Dec 31, 2020, cash and cash equivalents were $103.3 million compared with $64.4 million as of Dec 31, 2019 (read more: Hexcel Reports Loss in Q4, Misses Revenue Estimates).

2.     Raytheon Technologies’ fourth-quarter 2020 adjusted earnings per share (EPS) of 74 cents outpaced the Zacks Consensus Estimate by 4.2%. However, the bottom-line figure declined 36.2% from the year-ago quarter. Its fourth-quarter adjusted sales amounted to $16,583 million while GAAP sales came in at $16,419 million.

The company generated operating profit of $142 million compared with $956 million in the year-ago quarter.

Net cash inflow from operating activities amounted to $4,334 million at the end of 2020 compared with $5,821 million at the end of 2019 (read more: Raytheon Technologies Beats on Q4 Earnings & Sales).

3.    Lockheed Martin’s fourth-quarter 2020 earnings from continuing operations of $6.38 per share came in line with the Zacks Consensus Estimate. The bottom line, however, improved 20.6% from the year-ago quarter. Its net sales amounted to $17,032 million, which outshined the Zacks Consensus Estimate by 0.4% and  increased 7.3% on a year over year basis.

Lockheed Martin ended the fourth quarter (on Dec 31, 2020) with $147.1 billion in backlog, up 2.2% from $144 billion at the end of 2019.

The company’s cash from operations at the end of 2020 amounted to $8.18 billion compared with $7.31 billion a year ago (read more: Lockheed Martin Q4 Earnings & Sales Beat Estimates).

4.    Boeing’s adjusted loss of $15.25 per share for fourth-quarter 2020 was much wider than the Zacks Consensus Estimate of a loss of $1.78. Moreover, the bottom line deteriorated from the year-ago quarter’s loss of $2.33. Boeing’s revenues worth $15.30 billion surpassed the Zacks Consensus Estimate by 0.3% but declined 15% from the year-ago quarter.

The company’s backlog at the end of fourth-quarter 2020 dropped to $363.4 billion from $393.1 billion at the end of third-quarter 2020.

Boeing’s operating cash outflow at the end of 2020 was $18.41 billion compared with $2.45 billion at the end of 2019 (read more: Boeing Q4 Earnings Lag Estimates, Revenues Decline Y/Y).

5.    General Dynamics’ fourth-quarter 2020 earnings from continuing operations of $3.49 per share missed the Zacks Consensus Estimate by 1.7% and declined 0.6% from the prior-year quarter. Its fourth-quarter revenues of $10,481 million missed the Zacks Consensus Estimate by 3.4% and declined 2.7% year over year.

The company recorded a total backlog of $89.5 billion, up 2.9% year over year.

As of Dec 31, 2020, the company’s cash provided by operating activities was $3,858 million compared with $2,981 million as of 2019-end (read more: General Dynamics Q4 Earnings Miss Estimates, Sales Down Y/Y).

6.    Teledyne Technologies’ fourth-quarter 2020 adjusted earnings of $3.48 per share surpassed the Zacks Consensus Estimate by 10.1% and also improved 20% from the year-ago quarter. Its total sales in the fourth quarter amounted to $809.3 million, which exceeded the Zacks Consensus Estimate by 1.1% but declined 3% year over year.

Teledyne’s cash totaled $673.1 million as of Jan 3, 2021, compared with $199.5 million at the end of 2019.

For 2021, the company expects earnings of $11.25-$11.45 per share (read more: Teledyne Technologies Q4 Earnings & Sales Beat Estimates).

7.    Textron’s fourth-quarter 2020 adjusted earnings of $1.06 per share exceeded the Zacks Consensus Estimate by 16.5% but deteriorated 4.5% from the year-ago quarter’s figure. Its revenues came in at $3,667 million, which surpassed the Zacks Consensus Estimate by 5.7% but decreased 9.1% year over year.

As of Jan 2, 2021, cash and cash equivalents totaled $2,146 million compared with $1,181 million as of Jan 4, 2020.

Textron expects to generate adjusted earnings in the range of $2.70-2.90 per share in 2021 on revenues of $12.5 billion (read more: Textron Q4 Earnings Beat Estimates, Revenues Fall Y/Y).

Performance

Over the past five trading sessions, the defense biggies put up a dismal show, except General Dynamics. Textron lost the most, with its shares down 6.6% followed by Boeing.

In the last six months, the industry participants’ performance was mostly impressive, except that of L3Harris, Northrop and Lockheed Martin. Boeing gained the most with 18.7% rally 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

-3.56%

-11.05%

BA

-6.46%

18.71%

GD

0.61%

0.80%

RTX

-3.83%

1.09%

NOC

-1.71%

-2.44%

TXT

-6.55%

3.26%

LHX

-2.24%

-2.30%

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Textron Inc. (TXT) : Free Stock Analysis Report
 
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