Defense Stocks Apr 25 Q1 Earnings Roster: BA, GD, NOC & FLIR

The defense space kick-started the Q1 earnings season with Textron (NYSE:TXT) releasing results on Apr 18. This multi-industry conglomerate’s earnings surpassed the Zacks Consensus Estimate. Today, sector behemoth Lockheed Martin (NYSE:LMT) is scheduled to report results. In fact, majority of the defense giants are expected to release financial numbers this week.

As of Apr 20, 87 S&P 500 index members reported their quarterly results, wherein earnings increased 25% on 10.7% higher revenues. The space’s earnings are anticipated to record an 18.3% increase on 7.7% higher revenues, while two of the 16 Zacks sectors are likely to suffer a decline in earnings. We expect to have a clear picture of the space’s performance by the end of this week as 178 of the index members are scheduled to release their quarterly figures.

As of Apr 20, total Q1 earnings from the broader Aerospace sector are expected to increase 14.9% year over year on 4.6% higher revenues. For more details on quarterly releases, you can go through our Earnings Preview.

Defense stocks remained on a growth trajectory in the first quarter, courtesy of fiscal 2019 defense budget proposal presented by President Trump. Of the total amount, $686.1 billion has been reserved as funding for the Pentagon, reflecting 5% real growth over the initial FY18 President’s budget and 10% real growth over the current Continuing Resolution (CR). A steady flow of contracts from the Pentagon also provided an impetus to the stocks. Moreover, growing international market for weaponries with several nations increasing their defense spending is also likely to fuel the industry’s growth.

Let’s take a look at four defense majors—The Boeing Company (NYSE:BA) , General Dynamics Corp. (NYSE:GD) , Northrop Grumman Corporation (NYSE:NOC) and FLIR Systems, Inc. (NASDAQ:FLIR) —all of which are scheduled to release Q1 results before the opening bell on Apr 25.

Boeing delivered a positive earnings surprise of 64.95% in the last quarter. Notably, the company outperformed the Zacks Consensus Estimate in the trailing four quarters, with an average beat of 20.69%.

Being the largest aircraft manufacturer and one of the largest aerospace and defense contractors in the United States, Boeing enjoys a solid inflow of contracts from both the Pentagon as well as foreign allies, courtesy its varied product offerings. Markedly, the company received a number of orders for both commercial as well as military jets in the first quarter.

Such steady inflow of contract wins will surely boost Boeing’s quarterly sales. The Zacks Consensus Estimate for the company’s first-quarter sales is pegged at $22.2 billion, reflecting a year-over-year increase of 5.9%.

During its fourth-quarter 2017 earnings call, Boeing announced that higher volumes will drive its bottom line in 2018. Though, the company’s overall deliveries declined, commercial deliveries remained high. With the commercial business constituting almost 60% of Boeing’s total revenues, we expect the unit to drive the company’s first-quarter earnings.

Per our proven model, a stock is likely to beat earnings estimate if it has a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Impressively, Boeing constitutes that right combination.

The company has an Earnings ESP of +1.70%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Boeing currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Please note that we caution against stocks with a Zacks Rank #4 or 5 (Sellrated) going into the earnings announcement, especially when the company is seeing negative estimate revisions (read more:Can Order & Cash Flow Growth Aid Boeing's Q1 Earnings?).

General Dynamics delivered a positive earnings surprise of 5.49% in the last quarter. The company outperformed the Zacks Consensus Estimate in three of the trailing four quarters, with an average beat of 4.02%.

Order flow form the Pentagon as well as foreign allies of the United States generally boost quarterly sales of defense bellwethers and General Dynamics is no exception.In sync with this, the Zacks Consensus Estimate for the company’s first-quarter sales is pegged at $7.5 billion, reflecting 1.4% year-over-year growth.

In the first quarter, General Dynamics offered to buy CSRA — an information technology provider — for $9.6 billion, including $2.8 billion of debt.The Zacks Consensus Estimate for General Dynamics’ first-quarter earnings is pegged at $2.47 per share, marking 0.4% annual decline. This might have been caused by higher R&D expenses that management expects to incur across 2018.

The current Earnings ESP for General Dynamics is -0.23%, while it carries a Zacks Rank #3.Therefore, our model does not show that the company is likely to beat earnings estimates this quarter (read more: General Dynamics' Q1 Earnings: Is a Beat in the Offing?).

Northrop Grumman delivered a positive earnings surprise of 2.55% in the last quarter. The company outperformed the Zacks Consensus Estimate in the trailing four quarters, with an average beat of 16.17%.

The Aerospace Systems segment fetches almost half of Northrop Grumman’s sales and has traditionally been a primary contributor to its top-line growth. Notably, in the first quarter, the company received a number of contracts for this segment. In line with this, the Zacks Consensus Estimate for the Aerospace Systems segment is $3,131 million, reflecting annual growth of 16.1%.

The company’s total sales growth has historically benefited from higher sales at the Aerospace Systems and Mission Systems segment. Cumulatively, this is likely to boost the company’s total sales growth for the first quarter. While lower corporate tax on account of the recent tax reform is likely to boost the company’s bottom line, Northrop Grumman is expected to incur notable expenses in regard to its Orbital ATK acquisition.

The current Earnings ESP for Northrop Grumman is -0.99%, while it carries a Zacks Rank #2. Therefore, our model does not show that the company is likely to beat estimates this quarter (read more: Can Aerospace Unit Fuel Northrop Grumman Q1 Earnings?).

FLIR Systems posted a positive earnings surprise of 3.57% in the prior quarter. Moreover, the company has outperformed the Zacks Consensus Estimate in three of the trailing four quarters, the average positive surprise being 3.59%.

The company’s persistent focus on introduction of new products has enabled it to penetrate new markets and expand its customer base. Notably, since the launch of Lepton technology, FLIR Systems has witnessed solid compound annual growth rate in total unit volumes. We believe that steady market traction of the newly launched products should continue supplementing sales performance in the upcoming quarters as well.

The Earnings ESP for FLIR Systems is +2.33%, while the company carries a Zacks Rank #3. Therefore, our model indicates that FLIR Systems is likely to beat on earnings this quarter (read more: Can FLIR Systems Keep Earnings Streak Alive in Q1?).

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