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Aerospace & Defense ETFs to Buy on Decent Earnings

The Aerospace & Defense industry appears in good shape as evident by the Zacks Industry Rank which is in the top 37% segment. With this, investors must be interested in knowing how the sector has performed in the latest reporting cycle. This is especially true given the sector is torn between Trump effects (read: Reasons to Buy Defense ETFs Despite Trump's Twitter Attacks ).

On the one hand, Trump boosted the prospect of a new US missile defense system, on the other hand, he intends to save "billions" on military purchases. In fact, Lockheed Martin Corp.LMT has lately won a contract, worth $8.5 billion, from the Department of Defense ("DoD") for the production of 90 F-35 fighters. The contract price was the lowest rate to date for the company's most expensive program.

Overall, Trump seeks to put an end to the defense sequester and instead to raise the number of US Navy ships and expand the Air (read: Trump's First Press Conference Puts These ETFs in Focus ).

Against this backdrop, aerospace & defense behemoths have come up with decent earnings results in late January.

Let's dig a little deeper into the individual performances:

Aerospace & Defense Earnings in Detail

Aerospace giant The Boeing CompanyBA reported adjusted earnings of $2.47 per share for fourth-quarter 2016, beating the Zacks Consensus Estimate of $2.34 by 5.6%. Reported earnings surged 54.4% year over year. The company's revenues amounted to $23.29 billion in the reported quarter, missing the Zacks Consensus Estimate of $23.44 billion by 0.6%. The reported figure also declined 1.2% year over year.

Northrop Grumman CorporationNOC reported fourth-quarter 2016 adjusted earnings of $2.66 per share, beating the Zacks Consensus Estimate of $2.49 by 6.8%. Reported earnings were also up 22% from $2.18 recorded in the year-ago quarter. Its total revenue of $6.40 billion, came ahead of the Zacks Consensus Estimate of $5.91 billion. Revenues rose 12.3% year over year to $5.69 billion.

LMT posted fourth-quarter 2016 adjusted earnings of $2.38 per share, beating the Zacks Consensus Estimate of $2.12 by 12.3%. Earnings improved 10.2% from the year-ago figure of $2.16. Total revenue of $2.99 billion in the quarter surpassed the Zacks Consensus Estimate of $2.77 billion by 7.9%. Revenues were up 4.1% year over year.

The company also raised its 2017 outlook. It now expects earnings in the range of $8.40−$8.60 per share (versus the prior range of $8.15−$8.35) with revenues of $10.625 −$10.825 billion (versus the prior range of $10.475−$10.675 billion) for 2017.

United Technologies CorpUTX reported fourth-quarter 2016 adjusted earnings (from continuing operations) of $1.56 per share, in line with the Zacks Consensus Estimate. Adjusted net sales for the fourth quarter were $14.659 billion compared with $14.652 billion in the year-earlier quarter. Revenues beat the Zacks Consensus Estimate of $14.620 billion. United Technologies affirmed its guidance for 2017.

However, shares of General Dynamics CorporationGD reported fourth-quarter 2016 earnings from continuing operations of $2.62 per share, beating the Zacks Consensus Estimate of $2.54 by 3.2%. Reported earnings jumped 9.2% in the year-ago quarter. General Dynamics' total revenue of $8.233 billion missed the Zacks Consensus Estimate of $8.258 million by 0.3%. Reported revenues, however, increased slightly from $8.229 million in the year-ago quarter (read: Can Aerospace & Defense ETFs Win This Earnings Season? ).

ETFs in Focus

Mixed-to-upbeat results from these companies have pushed aerospace and defense ETFs higher in the last 20 days. Investors seeking to ride out the surging space in a diversified way could consider the following ETFs. All these products have a Zacks ETF Rank #1 (Strong Buy) (see all industrials ETFs here).

iShares US Aerospace & DefenseITA

The fund puts about 40% of its weight in the above-mentioned stocks. It charges 44 bps in fees and yields about 1.02% annually.

PowerShares Aerospace & Defense ETFPPA

The fund invests over 33% of its weight in the above-mentioned stocks. It charges about 64 bps in fees and yields about 1.65% annually.

SPDR S&P Aerospace & Defense ETFXAR

The fund invests about 20% of its weight in the above-mentioned defense stocks. It charges about 35 bps in fees and yields about 1.03% annually.

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Northrop Grumman Corporation (NOC): Free Stock Analysis Report

Boeing Company (The) (BA): Free Stock Analysis Report

General Dynamics Corporation (GD): Free Stock Analysis Report

Lockheed Martin Corporation (LMT): Free Stock Analysis Report

United Technologies Corporation (UTX): Free Stock Analysis Report

ISHARS-US AEROS (ITA): ETF Research Reports

SPDR-SP AER&DEF (XAR): ETF Research Reports

PWRSH-AERO&DEF (PPA): ETF Research Reports

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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.


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

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