Defense Stocks May 1 Earnings: Key Predictions for LLL & TDG

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With 267 S&P 500 members having reported their quarterly numbers as of Apr 27, the Q1 earnings season has crossed its half-way mark. So far, the results reflect a strong show, with Q1 earnings and revenue growth on track to reach its highest level in seven years.

Notably, quarterly earnings of the 267 S&P members have improved 25.1%, while revenues increased 107.5%. The beat ratio for the bottom line was 76.8%, while that for top line was 73.8%, as of Apr 27.

Coming to the Zacks Aerospace sector, a number of major stocks in this space like Lockheed Martin LMT , Boeing BA , Raytheon RTN and a few more, have released their Q1 results. Impressively, projections for this sector, hint at an impressive quarter, when compared to its fourth-quarter performance.

Evidently, the sector's earnings are likely to improve 37.3% on 7.5% higher revenues in the first quarter, whereas fourth-quarter earnings for this sector grew 31.8% on 7.3% revenue growth. For more details on quarterly releases, you can go through our latest 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  budget and 10% real growth over the current Continuing Resolution. 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.

With almost 921 companies (142 S&P 500 members) slated to report first-quarter results this week, let's find out how the following defense stocks are poised before their earnings release on May 1.

L3 Technologies, Inc. LLL delivered a positive earnings surprise of 2.17% in the last reported quarter. The company outperformed the Zacks Consensus Estimate in the trailing four quarters, with an average beat of 6.61%.

Usually contract wins from the Pentagon as well as foreign allies of the United States drive revenues for defense contractors like L3 Technologies. Unfortunately, the company did not secure any notable contract during the first quarter of 2018. This is likely to weigh on the company's revenues for the to-be-reported quarter.

L3 Technologies' strong balance sheet provides financial flexibility in matters of incremental dividends, ongoing share repurchases and earnings accretive acquisitions. Continuing with its trend of consistent dividend hike, the company raised its quarterly dividend by 6.7% in February 2018 to 80 cents. The company's balance sheet is expected to display solid figures during the earnings call.

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, L3 Technologies constitutes that combination.

The company has an Earnings ESP of +4.33%. You can uncover the best stocks to buy or sell before they're reported with our  Earnings ESP Filter .

L3 Technologies currently carries a Zacks Rank #3. You can see  the complete list of today's Zacks #1 Rank stocks here .

Conversely, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions (read more: Will Lack of Orders Dent L3 Technologies Q1 Earnings? ).

L3 Technologies Inc. Price and EPS Surprise

L3 Technologies Inc. Price and EPS Surprise | L3 Technologies Inc. Quote

Transdigm Group Incorporated TDG is slated to report second-quarter fiscal 2018 results. The company posted a negative earnings surprise of 5.07% in the last reported quarter. The company outperformed the Zacks Consensus Estimate in three of the trailing four quarters, with an average beat of 0.92%.

Transdigm has been riding on prudent acquisitions, positive industry trends, solid operational execution and steadily growing end markets. The company projects operating profit and bottom-line growth to benefit from the same in the to-be-reported quarter.

However, Transdigm has been witnessing negative trends in some end markets, of late, like weaker defense after-market orders as well as soft business jet, helicopter and freighter revenues. This is likely to dent its top-line growth.

Of late, the company's Defense business' performance has been better than expectations, adding to its strength. Moreover, a diversified revenue base lowers the company's dependence on any particular product, platform or market channel and will continue to play a significant role in maintaining financial performance in the near future.

The Earnings ESP for Transdigm is -1.34%. The company currently carries a Zacks Rank #3. Therefore, our model indicates that the company is unlikely to beat on earnings this quarter.

Transdigm Group Incorporated Price and EPS Surprise

Transdigm Group Incorporated Price and EPS Surprise | Transdigm Group Incorporated Quote

What's Ahead?

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

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The Boeing Company (BA): Free Stock Analysis Report

Lockheed Martin Corporation (LMT): Free Stock Analysis Report

Transdigm Group Incorporated (TDG): Free Stock Analysis Report

Raytheon Company (RTN): Free Stock Analysis Report

L3 Technologies Inc. (LLL): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: BA , LMT , TDG , RTN , LLL

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