February 7, 2023

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Defense stocks: Lockheed Martin and Raytheon mixed despite Ukraine reinforcement; Northrop Grumman on Deck

Defense Stocks began releasing fourth-quarter results beginning Tuesday. Raytheon (RTX) was the first to report, with Lockheed Martin (LMT) is due to follow early Tuesday. Northrop Grumman (No objection certificate) results on Thursday. RTX stock rose and LMT stock jumped after the results.




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The US defense budget has ballooned to an all-time high. But Republican lawmakers are pushing for cuts to reduce government debt that could affect defense spending this year, Noa Poponac, an analyst at Goldman Sachs, wrote in a research note last week.

Earnings reports come after The Department of Defense distributed a number of high-value contracts to defense companies in late December..

Lockheed Martin

Wall Street expected the maker of the F-16, F-22 and F-35 fighter jets to report its third quarterly profit drop in the past four periods, after a jump in profits in the third quarter. Revenue increased for the second consecutive quarter after declining for two consecutive reports.

Expectations: Wall Street expected Lockheed Martin’s earnings to fall 1% to $7.41 per share on revenue growth of 3% to $18.3 billion, according to FactSet.

results: Earnings fell to $7.40 per share while revenue grew 7.3% to $19 billion.

Lockheed Martin’s backlog increased 11% to $150 billion in the fourth quarter, driven by a 15% jump in its aerospace division to $56.63 billion. Its Q4 Aeronautics sales rose 7% to $7.6 billion, driven by higher volume of F-35 production contracts. The company generated $1.2 billion in free cash flow for the period.

For fiscal year 2023, Lockheed expects earnings to be between $26.60 and $26.90 per share from $65 billion to $66 billion in sales. Wall Street expects earnings of $26.93 per share on revenue of $65.74 billion.

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Meanwhile, the Biden administration plans to seek congressional approval for a $20 billion sale of new F-16s to Turkey, The Wall Street Journal reported Jan. 13. The sale will include 40 aircraft and a new kit to repair 79 aircraft in existing Turkey. fast. The White House will also order a separate sale of next-generation F-35 fighters to Greece. In December, Lockheed was awarded just over $1 billion to accelerate production as it works to deliver Lot 18 F-35 Lightning II fighter jets by next January.

LMT stock is in a seven-week rule before its earnings report. Shares are trading 11% lower than Point purchase From 499.05, according to MarketSmith. LMT stock jumped 5.5% on Tuesday after the results were announced. The stock is down 3% over the past three months but is up 18.8% year over year.

Raytheon

Raytheon, which is based out of Mass. It is one of the largest manufacturers of guided missiles, air defense systems, unmanned aircraft, satellites and war technology. In late December, the United States announced that it would provide Ukraine with Raytheon-made Patriot air defense systems to help in the fight against Russia as part of a $1.85 billion military aid package. Ukraine has suffered a barrage of Russian missile strikes in the past months that have destroyed power grids and critical infrastructure. The Biden administration was apprehensive about providing such defense systems to prevent provoking Moscow. In total, America provided Ukraine $27.5 billion in various military aid Since the Russian invasion last February.

Raytheon’s earnings growth slowed for seven quarters before Raytheon reported a 4% decline in the third quarter. But analysts expected its positive streak to resume in the fourth quarter. Revenue growth is expected to accelerate for the second consecutive quarter after eight periods of growth.

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Expectations: Raytheon saw earnings rise 15% to $1.24 a share, while revenue rose 6.7% to $18.2 billion.

results: Raytheon’s dividend rose about 18% to $1.27 a share. Revenue increased by about 6% to $18.09 billion.

Raytheon’s Missile & Defense division led its quarterly results, driven by equipment orders to Ukraine. During the fourth quarter, RMD’s book-to-bill ratio was 1.48, and sales increased 6% to $4.1 billion.

Management has directed 2023 revenue to be between $72 and $73 billion, against the FactSet consensus of $72.32 billion. Full-year adjusted earnings range from $4.90 to $5.05 per share, while analysts expect growth of 5% to $5.02 per share.

RTX stock fell out of the buy zone because of it Mug with handle base Last week after the hack on November 30th The 200-day moving average On Friday but they didn’t refund 10 days And 50 day streaks.

RTX stock rose 2% on Tuesday following the results. Shares are up about 8% over the past three months and about 10% over a year ago.

Northrop Grumman

Virginia-based Northrop Grumman provides anti-artillery equipment, radars, aircraft and surveillance systems. It also makes F-35 fighter jets with Lockheed Martin, which is one of the company’s biggest sources of income. Wall Street expects that Northrop’s earnings will recover after four consecutive declines. Revenues are expected to rise for the second consecutive quarter after declining for four consecutive quarters.

Expectations: Northrop Grumman is expected to report earnings increase of 9.7% to $6.58 per share, based on revenue growth of 11.8% to $9.66 billion.

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NOC stock is trading near July lows after hitting an all-time high in late October after a long rally into November 2021. Shares rose 1.2% on Tuesday ahead of their earnings report on Thursday. Northrop Grumman’s stock is down more than 14% over the past three months but is up 11% from a year ago.

You can follow Harrison Miller for more stock news and updates on Twitter @IBD_Harrison

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