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Defense Stocks Reporting Earnings on May 9: ARTX, LMIA, DCO

It’s almost time for a curtain call of the first-quarter earnings season, with nearly 75% of the S&P 500 members having already released their results. Nearly 71.4% of the total 374 releases surpassed earnings expectation while 56.4% topped revenue estimates. It’s so far so good, and if you add the recent weakening of the U.S. dollar, the S&P 500 members aren’t so precariously placed as they were widely thought to be.

However, overall first-quarter 2016 earnings from the S&P 500 members are expected to be 7.1% lower than first-quarter 2015 on a 1.1% decline in total revenues. Out of the 16 sectors in our coverage, nearly 50% are expected to register a decrease in earnings compared with the prior year. Aerospace’s earnings were expected to be down by 6.6% on a 0.4% decrease in revenues.

Among the 16 sectors in our coverage universe, the energy sector is expected to be the worst performer. Earnings from the energy sector are expected to be down 110.9% year over year on a 31.5% drop in revenues. Eight out of the 16 sectors are expected to come out with earnings growth this season with Automobile being the strongest at 53.2% earnings growth on 0.9% increase in revenues. For further details on earnings release kindly consult our Earnings Trend report.

Our proprietary model also shows that a stock which has a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has high chances of coming up with a positive surprise.

The top guns of the defense space like The Boeing Company BA and Lockheed Martin Corporation LMT have already released their first-quarter results. Boeing missed estimates by 3.8% while Lockheed came out with a positive earnings surprise of 2.8%.

With the first-quarter earnings season nearing its close, let’s take stock of some defense players who are going to report earnings on May 9.

Arotech Corporation ARTX, a Zacks Rank #1 stock, delivered a positive earnings surprise of 600.0% in the preceding quarter. This defense company has an ESP of 0.00% and is a leading provider of quality defense and security products. This company supplies pilot decision-making support software for the F-15, F-16, F-18, F-22, and F-35 aircraft.

The above chart indicates that Arotech Corporation delivered positive earnings surprises in two out of the last four quarters. The average positive earnings surprise was 166.67%.

LMI Aerospace Inc. LMIA, a Zacks Rank#3 stock, reported a positive earnings surprise of 185.71% last quarter. This defense company is a leading supplier of structural assemblies to the commercial, business and regional, and defense aerospace market. It supplies components to Boeing’s 737, 737 Max and 787 models. The backlog of the company continues to increase thanks to a continuous stream of orders from commercial giants. LMI Aerospace has an ESP of 0.00%.

The above chart indicates that LMI Aerospace delivered positive earnings surprises in three out of the last four quarters. The average positive earnings surprise was 223.93%.

Ducommun Inc. DCO, a Zacks Rank #5 (Strong Sell) stock, reported a negative earnings surprise of 5.41% last quarter. This  company has an ESP of 0.00% and is a global provider of manufacturing and engineering services in aerospace, defense and industrial markets. In first-quarter 2016, the company received a contract from Airbus to produce titanium structures for engine support on the A320neo aircraft.  Airbus also awarded Ducommun its first work on the A330neo platform.  Per the engineering design support contract, Ducommun will work with Airbus to improve the manufacturability, cost, and function of certain metal structure applications.


The above chart indicates that Ducommun Inc. delivered positive earnings surprises in only one out of the last four quarters. This led to an average negative earnings surprise of 70.40%.

Bottom Line

With the first-quarter earnings season nearing its close, let’s stay focused on the aerospace and defense stocks releasing their numbers on Monday.

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BOEING CO (BA): Free Stock Analysis Report
 
LOCKHEED MARTIN (LMT): Free Stock Analysis Report
 
LMI AEROSPACE (LMIA): Free Stock Analysis Report
 
DUCOMMUN INC DE (DCO): Free Stock Analysis Report
 
AROTECH CORP (ARTX): Free Stock Analysis Report
 
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