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Stay Tuned for Top Defense Earnings: BA, GD, NOC, LLL, RTN

We have seen Q1 results from only 7.3% of the defense sector’s total market cap, as of Apr 22, and major contractors are primed up to reveal their numbers this week.

So far, the earnings beat ratio has been really impressive, at 100%, taking into consideration budget volatility as well as the overall sector’s earnings projection. However, the top line of these companies has been hurt with only 50% coming in ahead of estimates.

The overall picture is still discomforting with the sector expected to register an 11.2% decrease in earnings on a 0.1% revenue decline, as per the Zacks Trend report.

Starting tomorrow and through this week, the defense biggies The Boeing Co. BA, General Dynamics Corp. GD, L-3 Communications Holdings Inc. LLL, Northrop Grumman Corp. NOC and Raytheon Co. RTN will release their first-quarter results.

Let’s have a sneak peak at the developments ahead of the call.

Leading commercial aircraft manufacturer, Boeing, is set to release first-quarter 2016 results before the opening bell on Apr 27. The company has an Earnings ESP of +0.55% and carries a Zacks Rank #3 (Hold).

The enacted fiscal-year 2016 budget will likely aid Boeing in many of its core programs, comprising the P-8 Poseidon, the KC-46A tanker, Apache and Chinook helicopters, GMD missile defense, commercial crew and space launch system. The company has already reported its delivery numbers for the first quarter. Though commercial deliveries declined 4.3% in the quarter, defense deliveries remained solid (read more: Boeing Poised for Q1 Earnings Beat: Will Stock Gain?).

General Dynamics Corp. is set to release first-quarter 2016 results before the opening bell on Apr 27. The company had earlier disclosed that free cash flow in 2016 will come in below net income due to its investment in Gulfstream. However, General Dynamics generates revenues from a broad portfolio of products and services that help to keep its overall growth momentum steady.

The company also raised the quarterly dividend on its common stock by 10.1% to 76 cents per share from 69 cents in the first quarter. The hike indicates the successful implementation of the company’s investment growth strategy. It has an Earnings ESP of +1.40% and a Zacks Rank #3 (read more: Defense Stock General Dynamics to Beat Q1 Earnings?).


Another defense major Northrop Grumman is set to release first-quarter 2016 results before the opening bell on Apr 27. Although the company did not provide any guidance specifically for the first quarter, it had hinted during the fourth quarter call that 2016 will be another year of strong operating performance.

The company will initiate work on some major new development programs, as it transitions from a number of legacy production programs in aerospace and electronic systems to new production programs in aerospace emission systems. Though Northrop Grumman currently carries a Zacks Rank #3, a 0.00% earnings ESP makes a beat difficult to predict (read more: Will Northrop Pull Off a Surprise with Q1 Earnings?).


L-3 Communications Holdings will release first-quarter 2016 results before the opening bell on Apr 27. Among the highlights of the first quarter, L-3 Communications bagged a number of contracts. The company received a major contract for a Power Node Control Center for naval destroyers. The company believes that its use can be expanded further to other U.S. Navy platforms, including carriers, amphibious assault ships and littoral combat ships.

However, the company had earlier said that the final surplus of the Afghanistan drawdown sales would dent its revenues by about $135 million in 2016, without which sales to the U.S. government and DoD markets would be more or less flat (read more: What Awaits L-3 Communications in Q1 Earnings?).


Raytheon’s missiles and ship defense systems will continue to witness strong demand. Its Patriot missile-defense systems have been seeing a number of buyers of late. Management stated that the Integrated Defense Systems division, which includes Patriot, will report strong margins in the to-be-reported quarter on the back of solid performance as well as an expected contract modification.

Raytheon will release first-quarter 2016 financial results before the market opens on Apr 28 (read more: Can Raytheon Keep the Earnings Streak Alive in Q1?).


Stay tuned! Do check for our full write-up on earnings releases of these stocks.

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NORTHROP GRUMMN (NOC): Free Stock Analysis Report
 
BOEING CO (BA): Free Stock Analysis Report
 
GENL DYNAMICS (GD): Free Stock Analysis Report
 
RAYTHEON CO (RTN): Free Stock Analysis Report
 
L-3 COMM HLDGS (LLL): Free Stock Analysis Report
 
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