Defense Stocks' Q3 Earnings Slated For Oct 25: LMT And OA

The Q3 earnings season in the defense sector was jumpstarted by the quarterly release of Textron Inc. (NYSE:TXT) on Oct 20, so far the only company to have reported results. This week, we expect to see quite a few of the major defense contractors to come up with financial numbers.

As of Oct 21, 29.7% of the market cap of the S&P 500 index has reported quarterly results, revealing a 3.3% increase in earnings on 1.8% higher revenues. Overall, earnings are anticipated to record a 0.1% increase on 1.5% higher revenues, with 7 of the 16 Zacks sectors witnessing growth in the negative territory. The picture should become clearer by the end of this week, as a number of the index members are scheduled to report earnings results.

Notably, projections for the aerospace and defense sector hint at a dismal quarter, in fact, worse than the overall forecast for the S&P 500 cohort. Sector earnings are likely to decline 1.3% on 3.3% deterioration in revenues. For more details on quarterly releases, you can go through our Earnings Preview report.

Let’s take a look at a couple of defense companies that are scheduled to report financial results on Oct 25.

Lockheed Martin Corporation (NYSE:LMT) is an aerospace behemoth. Our proven model does not conclusively show that Lockheed Martin is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. You can see the complete list of today’s Zacks #1 Rank stocks here. However, that is not the case here.

The Earnings ESP for Lockheed Martin is +0.35% because the Most Accurate estimate stands at $2.87, while the Zacks Consensus Estimate is pegged slightly lower at $2.86. However, Lockheed Martin has a Zacks Rank #4 and we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement. (Read more: Will Lockheed Martin Disappoint in Q3 Earnings?)

Orbital ATK, Inc. (NYSE:OA) has delivered a positive earnings surprise of 3.85% in the last quarter.

Orbital ATK has an Earnings ESP of +0.00%. This is because the Most Accurate estimate of $1.39 stands in line with the Zacks Consensus Estimate. However, the company has a Zacks Rank #4, which means the company is not likely to beat earnings in the to-be-reported quarter. (Read more: Orbital ATK Q3 Earnings: What's in Store for the Stock?)

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