U.S. Markets close in 53 mins

Defense Stock Roundup: TXT, LMT, BA, UTX, NOC Report Impressive Q1 Earnings

Zacks Equity Research
Bull Of The Day: General Electric (GE)

Following impressive Q1 numbers, the major indices of the Aerospace-Defense space ended 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 2% in the aforementioned time period.

Among the past week’s highlights, quarterly results from a number of Aerospace-Defense majors namely, Textron Inc. TXT, Lockheed Martin Corp. LMT, The Boeing Company BA, United Technologies, Corp. UTX, Northrop Grumman Corp. NOC, FLIR Systems Inc. FLIR and General Dynamics Corp. GD remained a key area of investors’ focus.

Recap of Past Week’s Important Stories

1.    Textron reported first-quarter 2019 earnings from continuing operations of 76 cents per share, which surpassed the Zacks Consensus Estimate of 70 cents by 8.6%. The bottom line also increased 5.6% year over year. Total revenues of $3,109 million missed the Zacks Consensus Estimate of $3,216 million by 3.3%. Cash outflow from operating activities amounted to $196 million at the end of the first quarter of 2019 compared with $53 million at the end of the prior-year period.

At the end of the first quarter, order backlog at the company’s Bell segment’s totaled $6.3 billion, up $0.5 billion from the figure registered in the preceding quarter (read more: Textron's Q1 Earnings Beat, Revenues Miss Estimates).

2.    Lockheed Martin’s first-quarter 2019 earnings of $5.99 per share outpaced the Zacks Consensus Estimate of $4.29 by 39.6%. The bottom line also improved 49% year over year. The company’s net sales amounted to $14.34 billion, which exceeded the Zacks Consensus Estimate of $12.65 billion.

Notably, Lockheed Martin ended the first quarter (on Mar 31, 2019) with $133.5 billion in backlog, up 2.3% from $130.5 billion at the end of 2018. Its cash from operations at the end of first-quarter 2019 amounted to $1.66 billion compared with $0.63 billion a year ago.

Furthermore, the company paid dividends worth $638 million to its shareholders compared with the year-ago figure of $586 million. Lockheed Martin’s earnings per share for 2019 are currently anticipated to be in the $20.05-$20.35 range, higher than $19.15-$19.45 guided earlier (read more: Lockheed Martin Beats on Q1 Earnings, Raises '19 View).

3.    Boeing reported adjusted earnings of $3.16 per share for first-quarter 2019, which outshined the Zacks Consensus Estimate of $3.11 by 1.6%. The bottom line, however, reflected a year-over-year decline of 13%. Revenues amounted to $22.92 billion, which trumped the Zacks Consensus Estimate of $22.26 billion.

Backlog at the end of first quarter 2019 slipped to $487 billion from $490.48 billion at the end of 2018. Additionally, Boeing delivered 149 commercial planes during the quarter under review, down 19%.

It exited the first quarter with cash and cash equivalents of $6.84 billion, and short-term and other investments of $0.89 billion. Boeing generated $2.79 billion of operating cash flow at the end of the reported quarter, down 11.1% year over year (read more: Boeing Q1 Earnings Top, Down Y/Y on Lower 737 Deliveries).

4.    United Technologies’ first-quarter 2019 adjusted earnings came in at $1.91 per share, surpassing the Zacks Consensus Estimate of $1.75. Revenues totaled $18,365 million, which increased 20.5% year over year and also exceeded the consensus estimate of $18,068 million.

The company exited the first quarter with cash and cash equivalents of $6,240 million, up from $6,152 million as of Dec 31, 2018. Moreover, United Technologies generated net cash of $1,500 million from operating activities, significantly up from $453 million recorded a year ago.

For 2019, United Technologies revised its earnings view to $7.80-$8.00 per share from $7.70-$8.00 projected earlier (read more: United Technologies Q1 Earnings Top, EPS View Revised).

5. Northrop Grumman reported earnings of $5.06 per share in first-quarter 2019, which surpassed the Zacks Consensus Estimate of $4.59 by 10.2%. The bottom line also increased 5.6% year over year.  Meanwhile, total sales of $8,189 million missed the Zacks Consensus Estimate of $8,316 million by 1.5%.

Northrop Grumman’s cash and cash equivalents as of Mar 31, 2019, were $755 million, down from $1,579 million as of Dec 31, 2018.

For 2019, Northrop Grumman raised its earnings expectations from the range of $18.5-$19 to $18.90-$19.30 per share (read more: Northrop Grumman Beats on Q1 Earnings, Ups '19 EPS View).

6.    FLIR Systems’ first-quarter 2019 adjusted earnings of 53 cents per share outshined the Zacks Consensus Estimate of 48 cents by 10.4%. Its revenues inched up 1.2% year over year to $444.7 million in the reported quarter.

The company’s organic revenues rose 0.9% year over year. Cash flow from operating activities in the first quarter 2019 amounted to $55.5 million, up 28.6% from the prior-year quarter’s figure of $43.2 million.

For 2019, FLIR Systems continues to expect adjusted earnings per share in the range of $2.30-$2.36 on revenues of $1.92-$1.95 billion (read more: FLIR Systems Q1 Earnings Beat Estimates, Improve Y/Y).

7.    General Dynamics’ first-quarter 2019 earnings from continuing operations of $2.56 per share trumped the  Zacks Consensus Estimate of $2.38. Also, revenues of $9,261 million surpassed the Zacks Consensus Estimate of $8,890 million by 4.2%.

The company recorded a total backlog of $69.2 billion, up 11.4% year over year. Company-wide operating margin contracted 250 basis points (bps) to 10.9% from 13.4% in the year-ago quarter.

As of Mar 31, 2019, General Dynamics’ cash and cash equivalents were $673 million compared with $963 million as of Dec 31, 2018, (read more: General Dynamics Q1 Earnings Beat, Revenues Up Y/Y).

Performance

Over the past five trading sessions, the defense biggies put up a solid show, except Northrop Grumman and Boeing. Lockheed Martin gained the most with 5% increase in share price, followed by General Dynamics.

Over the last six months as well, the industry's performance has been impressive except for Northrop Grumman. This time also Lockheed Martin has gained the most with 6% rise in the share price, followed by Boeing.

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 4.93% 6.10%
BA -1.64% 5.87%
GD 4.02% 4.32%
RTN 1.69% 1.83%
NOC -0.57% -2.05%
TXT 4.01% 2.51%
LLL 0.34% 4.67%


What’s Next?

Leidos Holdings is set to release its first-quarter 2019 results on Apr 30.

L3 Technologies is scheduled to reveal its first-quarter 2019 numbers on May 1.

Spirit Aerosystems and Huntington Ingalls are set to announce their first-quarter 2019 results on May 2.

Radical New Technology Creates $12.3 Trillion Opportunity

Imagine buying Microsoft stock in the early days of personal computers… or Motorola after it released the world’s first cell phone. These technologies changed our lives and created massive profits for investors.

Today, we’re on the brink of the next quantum leap in technology. 7 innovative companies are leading this “4th Industrial Revolution” - and early investors stand to earn the biggest profits.

See the 7 breakthrough stocks now>>