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Defense Stock Q3 Earnings Reports Due on Oct 28: BA, GD, CW

Zacks.com logo Zacks.com 10/27/2020

A handful of defense majors are expected to release Q3 financial numbers this week. The current reporting cycle for the defense space began with Lockheed Martin LMT reporting its numbers on Oct 20. Notably, the company surpassed estimates for both earnings and revenues.

The upcoming quarterly results of defense bigwigs are expected to reflect the adverse impacts of the coronavirus outbreak that have been persisting since March. In particular, stocks which significantly participate in commercial aerospace are expected to have suffered the most in the third quarter, as air travel demand still remained substantially low when compared to the pre-COVID level.

However, stocks that are more focused on the combat side of the industry are unlikely to have recorded poor Q3 numbers as a result of steady government support.  Nevertheless, many of the companies had to forcibly reduce their production rate to accommodate declining demand and business restrictions, thanks to the pandemic.

No doubt this caused production inefficiencies, thereby dealing a blow to the industry’s margins. Moreover, lower delivery volumes of finished products, rising expenses to store undelivered products along with supply chain shortages faced by some defense manufacturers might have dragged down revenues and earnings.

Considering the aforementioned factors, we remain a bit skeptical about the broader Aerospace sector, which constitutes defense stocks.

Q3 Projections

Aerospace sector Q3 earnings are expected to plunge 46.5% year over year while revenues are projected to show 10.4% decline.  

For more details on quarterly releases, you can go through the latest Earnings Preview.

Defense Stocks to Watch

Let's take a look at some defense companies that are scheduled to report third-quarter 2020 earnings on Oct 28 and find out how things have shaped up prior to the announcements.

The Boeing Company’s BA third-quarter deliveries reflected a massive 54.8% decline in commercial shipments from the year-ago reported figure. Defense shipments plunged 108.1%. Such dismal delivery performance makes us skeptical about Boeing’s results this time around.

Low volumes of commercial aftermarket jet service are expected to have weighed on Boeing Global Service unit’s revenues in the yet-to-be-reported quarter. Effect of 737 grounding since March 2019 and the subsequent halt in production of this program are likely to have also taken a toll on the jet maker’s overall quarterly performance (read more: Poor Segmental Performance to Mar Boeing's Q3 Earnings).

According to the Zacks model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

Boeing has an Earnings ESP of +9.58% and a Zacks Rank #4 (Sell). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The Boeing Company Price and EPS Surprise

chart, line chart: The Boeing Company Price and EPS Surprise © Provided by Zacks.com The Boeing Company Price and EPS Surprise

The Boeing Company price-eps-surprise | The Boeing Company Quote

 

General Dynamics’ GD Q3 results are expected to reflect poor quarterly figures, thanks to significant disruptions in its production and delivery schedules that the company has been witnessing for the past couple of quarters, caused by prolonged COVID-19-induced business restrictions and supply-chain issues. In particular, its Aerospace business unit is projected to take the major burnt of the COVID-19 impacts.

However, its combat systems and marine systems segments are forecast to report year-over-year growth in the yet-to-be-reported quarter. Moreover, lower IT services volumes in the General Dynamics Information Technology segment might have had an adverse impact on the company’s quarterly earnings.

General Dynamics has an Earnings ESP of +1.36% and a Zacks Rank #4 (read more: Will Aerospace Unit Hurt General Dynamics' Q3 Earnings?).

General Dynamics Corporation Price and EPS Surprise

chart, line chart: General Dynamics Corporation Price and EPS Surprise © Provided by Zacks.com General Dynamics Corporation Price and EPS Surprise

General Dynamics Corporation price-eps-surprise | General Dynamics Corporation Quote

 

Curtiss-Wright Corp. CW delivered a four-quarter average earnings surprise of 3.60%. The company’s third quarter revenue estimate of $564.8 million indicates a deterioration of 8.1% from the year-ago quarter’s reported figure. The Zacks Consensus Estimate for earnings of $1.53 per share suggests a plunge of 21.5% from the prior-year quarter reported figure.

Curtiss-Wright currently has an Earnings ESP of +1.64% and carries a Zacks Rank #4.

CurtissWright Corporation Price and EPS Surprise

chart, line chart: CurtissWright Corporation Price and EPS Surprise © Provided by Zacks.com CurtissWright Corporation Price and EPS Surprise

CurtissWright Corporation price-eps-surprise | CurtissWright Corporation Quote

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