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Defense Stock Roundup: Q1 Earnings Miss at HII, Beat at LDOS

With the first-quarter 2017 earnings cycle coming to a close, we have observed a noticeable improvement in the quarterly releases by 446 S&P 500 members, as of May 10. Evidently, 72.4% of these index members surpassed EPS estimates with earnings rising 14% from the first quarter of 2016 on 7.9% higher revenues. Coming to the broader Aerospace sector, all the companies have released their results, with 80% coming up with an earnings beat and 40% surpassing revenue estimates.

Quarterly results dominated this space over the past five trading sessions. A moderate flow of funds from the Pentagon also boosted the prospects of defense stocks. As a result, major indices of the Aerospace-Defense industry ended in the green. While the S&P 500 Aerospace & Defense (Industry) Index inched up 0.6%, the Dow Jones U.S. Aerospace & Defense Index rose 0.4% in the last five trading sessions.

Among last week’s highlights, defense primes Huntington Ingalls Industries, Inc. HII, Leidos Holdings, Inc. LDOS and Spirit AeroSystems Holdings, Inc. SPR released their quarterly figures. Meanwhile, The Boeing Company BA secured a notable contract from the Department of Defense (DoD).

(Read Defense Stock Roundup for May 4, 2017 here)

Recap of Last Week’s Key Stories

1. Defense giant Huntington Ingalls’ first-quarter 2017 adjusted earnings missed the Zacks Consensus Estimate by 31.3%. Adjusted earnings also declined 21.4% year over year owing to a decline in the top line and operating income.

Total revenue also missed the Zacks Consensus Estimate and dropped 2.2% on a year-over-year basis. The downside was primarily due to lower contribution from its Ingalls and Newport News divisions.

The company received new orders worth $600 million during the reported quarter, as a result of which its total backlog reached $20 billion as of Mar 31, 2017 (read more: Huntington Ingalls Misses Q1 Earnings, Sales Drop Y/Y).

2. Leidos Holdings’ first-quarter 2017 adjusted earnings surpassed the Zacks Consensus Estimate by 12.8%. Reported earnings also increased 22.2% year over year.

Total revenue for the company beat the Zacks Consensus Estimate by 1.2%. Reported revenues also improved 96.7% year over year.

At the end of the first quarter, the company’s backlog of signed business orders totaled $16.9 billion, of which $4.9 billion was funded. For 2017, the company reaffirmed its earnings guidance at the range of $3.05 to $3.35 (read more: Leidos Holdings Beats on Q1 Earnings, Keeps '17 View).

3. Spirit AeroSystems’ first-quarter 2017 adjusted earnings were in line with the Zacks Consensus Estimate. Earnings declined 9.3% on a year-over-year basis.

Total revenue surpassed the Zacks Consensus Estimate by 2.2%. Revenues were also up 0.7% year over year.

Backlog at the end of the reported quarter was $46 billion, reflecting a sequential decline of $1 billion. Spirit AeroSystems continues to expect earnings per share in the range of $4.60–$4.85 on revenues in the band of $6.8−$6.9 billion (read more: Spirit AeroSystems Q1 Earnings Meet, Backlog Declines).

4. Boeing clinched a modification contract worth $143.4 million from the U.S. Army. Through this foreign military sales (FMS) deal, Boeing will offer unique modifications to 24 AH-34E Apache attack helicopters owned by the Saudi Arabia National Guard II and III.

The deal was awarded by the U.S. Army Contracting Command, Redstone Arsenal, AL and its expected completion date is Apr 2020. Work related to this agreement will be carried out in Mesa, AZ.

Last Week’s Performance

The defense biggies posted strong numbers in the trailing five trading sessions, except General Dynamics Corp. GD. Textron Inc. TXT gained the most at 1.43%, followed by Raytheon Company RTN.

Over the past six months, all the industry majors delivered a stellar performance. Notably, Boeing gained the maximum at 23.34%, followed by Rockwell Collins.

The following table shows the price movement of major defense players over the past five trading days and the last six months.

CompanyLast WeekLast 6 Months
LMT0.75%4.85%
BA0.08%23.34%
GD-0.17%15.33%
RTN1.43%7.38%
NOC1.22%0.25%
COL0.90%18.09%
TXT2.81%4.85%
LLL0.03%11.66%

 

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Boeing Company (The) (BA): Free Stock Analysis Report
 
General Dynamics Corporation (GD): Free Stock Analysis Report
 
Huntington Ingalls Industries, Inc. (HII): Free Stock Analysis Report
 
Leidos Holdings, Inc. (LDOS): Free Stock Analysis Report
 
Spirit Aerosystems Holdings, Inc. (SPR): Free Stock Analysis Report
 
Textron Inc. (TXT): Free Stock Analysis Report
 
Raytheon Company (RTN): Free Stock Analysis Report
 
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