Defense stocks: Lockheed Martin, Raytheon Mixed Despite Ukraine Boost; Northrop Grumman on deck

Defense stocks began reporting fourth-quarter results from Tuesday. Raytheon (RTX) was the first to report, with Lockheed Martin (LMT) should follow early Tuesday. Northrop Grumman (CNO) results are expected on Thursday. RTX stock rose and LMT stock surged after the results.




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The United States defense budget has reached unprecedented heights. But Republican lawmakers are pushing to reduce public debt, which could potentially affect defense spending this year, Goldman Sachs analyst Noah Poponak wrote in a research note last week.

The reports on the results come after the Department of Defense handed out a number of high-value contracts to defense contractors in late December.

Lockheed Martin

Wall Street forecast the maker of F-16, F-22 and F-35 fighter jets to report its third quarterly decline in earnings in the past four periods, following a jump in profits in the third quarter. Revenue rose for the second consecutive quarter after falling for two consecutive reports.

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

Results: Earnings fell to $7.40 per share while revenue rose 7.3% to $19 billion.

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

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

Meanwhile, the Biden administration plans to seek congressional approval for a $20 billion sale of new F-16 jets to Turkey, The Wall Street Journal reported on January 13. The sale would include 40 new aircraft and kits to overhaul 79 aircraft in Turkey. fleet. The White House will also request a separate sale of next-generation F-35 fighters to Greece. In December, Lockheed received just over $1 billion to ramp up production as it strives to deliver 118 Batch 18 F-35 Lightning II fighter jets by next January.

LMT stock is in a seven-week basis before its earnings report. The shares are trading 11% below the buy point of 499.05, according to MarketSmith. LMT stock jumped 5.5% on Tuesday after the earnings release. The stock is down 3% in the past three months, but up 18.8% in the past year.

Raytheon

Massachusetts-based Raytheon is a leading manufacturer of guided missiles, air defense systems, drones, satellites and warfare technology. In late December, the United States announced that it would supply Ukraine with Raytheon-made Patriot air defense systems to aid in the war against Russia as part of a 1, $85 billion. Ukraine has suffered a barrage of Russian missile strikes in recent months that have destroyed power grids and vital infrastructure. The Biden administration had feared providing such defense systems to prevent provoking Moscow. In total, America has provided Ukraine with $27.5 billion in various military aid since the Russian invasion last February.

Raytheon’s earnings growth slowed for seven quarters before Raytheon posted 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.

Expectations: Raytheon’s earnings rose 15% to $1.24 per share while revenue climbed 6.7% to $18.2 billion.

Results: Raytheon’s earnings rose nearly 18% to $1.27 per share. Revenue rose about 6% to $18.09 billion.

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

Management guided 2023 revenue between $72 billion and $73 billion, versus a FactSet consensus of $72.32 billion. Adjusted earnings for the full year are between $4.90 and $5.05 per share, while analysts expect growth of 5% to $5.02 per share.

RTX stock fell out of the buy zone for its cup with handle base last week after breaking out on Nov. 30. Stocks bounced off their 200-day moving average on Friday, but have yet to recover their 10- and 50-day lines. .

RTX stock rose 2% on Tuesday after the results. Shares are up nearly 8% in the past three months and nearly 10% in the past year.

Northrop Grumman

Virginia-based Northrop Grumman provides counter-artillery equipment, radar and surveillance aircraft and systems. It also manufactures F-35 fighter jets with Lockheed Martin, which are among the company’s biggest revenue generators. Wall Street predicts Northrop’s earnings will rebound after four straight declines. And revenue is expected to rise for the second consecutive quarter after falling four straight quarters.

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

NOC stock is trading near July lows after hitting all-time highs in late October following its long run dating back to November 2021. The shares rose 1.2% on Tuesday ahead of its earnings report on Thursday. Northrop Grumman stock is down more than 14% in the past three months, but up 11% in the past year.

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

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