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Defense Stock Roundup: GD, NOC, LLL, UTX, RTN Beat on Q4 Earnings

The Q4 earnings season is in full swing, with almost 26% of S&P 500 companies having released their quarterly results. As of Jan 24, of the 89 S&P 500 members which revealed their earnings numbers, 80.9% delivered an earnings beat, while 74.2% surpassed revenue estimates.

Coming to the broader Aerospace sector's performance, 9.1% of the defense stocks released earnings as of Jan 24, with an earnings beat ratio of 100% on 0.5% sales growth.

The impressive earnings results got reflected in the defense stock's performance over the last five trading sessions. Major indices of the Aerospace-Defense space - the S&P 500 Aerospace & Defense (Industry) index rose 3.4%, while the Dow Jones U.S. Aerospace & Defense index grew 3.3% - during this period.

Among last week's highlights, defense primes, General Dynamics Corp.GD , Northrop Grumman Corp.NOC , Raytheon Co.RTN , L3 Technologies, Inc.LLL , Rockwell Collins Inc.COL , United Technologies Corp.UTX and Honeywell International Inc.HON have released their quarterly figures.

Recap of Last Week's Key Stories

1. General Dynamics' fourth-quarter 2017 earnings from continuing operations of $2.50 per share surpassed the Zacks Consensus Estimate of $2.37 by 5.5%. Reported earnings were up 6.8% from $2.36 recorded in the year-ago quarter.

However, the company's total revenues of $8,277 million missed the Zacks Consensus Estimate of $8,437 million by 1.9%. Nevertheless, revenues were up 8.2% from $7,654 million in the year-ago quarter.

As of Dec 31, 2017, General Dynamics' cash and cash equivalents were $2,983 million compared with $2,334 million as of Dec 31, 2016. The company's cash flow from operating activities was $3,879 million for 2017 compared with $2,198 million in 2016 (read more: General Dynamics Beats Q4 Earnings, Revenues Up Y/Y ).

2. Raytheon's fourth-quarter 2017 adjusted earnings from continuing operations of $2.03 per share exceeded the Zacks Consensus Estimate of $2.02 by 0.5%.

The company's reported earnings of $1.35 per share came in below the prior-year quarter's equivalent of $1.88, owing to the Tax Cuts and Job Acts of 2017, which had an unfavorable impact of 59 cents on earnings.

The company's fourth-quarter revenues of $6,783 million witnessed 8% year-over-year growth, which however missed the Zacks Consensus Estimate of $6,833.7 million by 0.7%.Total backlog at the end of 2017 was $38.2 billion, compared with $36.7 billion at the end of 2016.

Raytheon ended 2017 with cash and cash equivalents of $3,103 million, down from $3,303 million as of Dec 31, 2016 (read more: Raytheon Beats on Q4 Earnings, Issues '18 Outlook ) .

3. L3 Technologies' fourth-quarter 2017 adjusted earnings of $2.35 per share from continuing operations topped the Zacks Consensus Estimate of $2.30 by 2.2%. The company reported earnings of $3.34, higher than the prior-year quarter's equivalent of $2.32, led by a tax benefit of 99 cents.

Total revenues of $2.57 billion in the quarter beat the Zacks Consensus Estimate of $2.55 billion by 1.1%. However, the top line was down 3% year over year. Its funded backlog was $9 billion as of Dec 31, 2017, up 6% from $8.4 billion as of Dec 31, 2016.

As of Dec 31, 2017, L3 Technologies had $662 million in cash and cash equivalents compared with $363 million as of Dec 31, 2016. L3 Technologies raised its 2018 earnings outlook. The company now expects earnings in the range of $9.30-$9.50 per share (read more: L3 Technologies Q4 Earnings Top, Raises '18 EPS View ).

4. Northrop Grumman's fourth-quarter 2017 earnings of $2.82 per share surpassed the Zacks Consensus Estimate of $2.75 by 2.5%. Reported earnings were $1.01, down nearly 65.9% year over year, due to higher tax expenses resulting from the enactment of the Tax Cuts and Jobs Act.

Its total revenues of $6.63 billion also surpassed the Zacks Consensus Estimate of $6.37 billion by 4.1%. Total backlog at the end of 2017 was $42.9 billion, down 5.5% from the year-ago period.

Northrop Grumman's cash and cash equivalents as of Dec 31, 2017 were $12.2 billion, up from $2.54 billion as of Dec 31, 2016. The company expects to generate earnings in the range of $15.00-$15.25 per share (read more: Northrop Grumman Beats Q4 Earnings & Revenue Estimates ).

5. Rockwell Collins' adjusted earnings per share of $1.59 beat the Zacks Consensus Estimate of $1.53 by 3.9%, during first-quarter fiscal 2018. Reported earnings grew 30.3% from $1.22 a year ago.

The company's total sales were $2,011 million, which topped the Zacks Consensus Estimate of $1,988 million by 1.2%.

As of Dec 31, 2017, Rockwell Collins' cash and cash equivalents were $583 million compared with $703 million as of Sep 30, 2017. Cash used for operating activities at the end of the quarter was $259 million, compared with 101 million in the prior-year quarter (read more: Rockwell Collins Beats on Q1 Earnings, Sales Up Y/Y ).

6. Excluding restructuring and other non-recurring items, United Technologies' adjusted earnings for the fourth quarter2017 were $1.60 per share, which beat the Zacks Consensus Estimate of $1.56.

Net sales in the reported quarter came in at $15,680 million compared with $14,659 million in the year-ago quarter.Quarterly sales exceeded the Zacks Consensus Estimate of $15,400 million.

United Technologies exited 2017 with cash and cash equivalents of $8,985 million compared with $7,157 million of the previous year. For 2017, the company generated net cash of $5,631 million from its operating activities, down from $6,412 million recorded in the year-ago period read more: United Technologies Q4 Earnings Beat, 2018 View Solid ).

7. Excluding non-recurring items, Honeywell's adjusted earnings for the fourth quarter2017 were $1.85 per share compared with $1.74 in the year-earlier quarter. Adjusted earnings for the quarter beat the Zacks Consensus Estimate by a penny.

The company's quarterly revenues grew 8.6% year over year to $10,843 million and exceeded the Zacks Consensus Estimate of $10,689 million. Total segment profit for the quarter was $2,096 million compared with $1,899 million in the prior-year period, with respective segment profit margins of 19.3% and 19%.

Net cash provided from operating activities for 2017 was $5,966 million compared with $5,498 million in 2016.Honeywell revised full-year 2018 earnings guidance to better reflect the favorable impact from the tax reform (read more :Honeywell Beats Q4 Earnings on Organic Growth, View Up ).

Performance

Over the last five trading sessions, the defense biggies put up a solid show. General Dynamics gained the most with its share price gaining 8.7% in this period, followed by Raytheon.

Over the last six months, the entire industry has once again put up a stellar performance. Keeping up with its usual trend, Boeing gained the most, with its shares gaining 41.6%, followed by Northrop Grumman.

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

Company Last Week Last 6 Months
LMT 3.10% 18.76%
BA 1.53% 41.56%
GD 8.66% 15.23%
RTN 6.36% 21.45%
NOC 6.32% 27.06%
COL 1.17% 22.54%
TXT 3.00% 23.57%
LLL 3.22% 23.04%

What's Next in This Space?

Harris Corp. is set to release fiscal second-quarter 2018 results on Jan 30.

Boeing and Textron are set to release fourth-quarter 2017 results before the market opens on Jan 31.

Spirit AeroSystems is scheduled to report fourth-quarter earnings on Feb 2 before the market opens.

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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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