Booz Allen Hamilton andL3Harris Technologies rounded out quarterly results for defense companies this week after Northrop Grumman tossed its earnings report into the ring on Thursday. Raytheon Technologies announced mixed results early Tuesday followed by General Dynamics' beat on Wednesday.
Defense stocks have generally outperformed the market this year as the United States spent billions on aid to support Ukraine following Russia's invasion in February. As the war in Ukraine escalated, President Vladimir Putin publicly warned of his willingness to resort to nuclear force in late September. Meanwhile, tensions between the United States and China have risen over the sovereignty of Taiwan. As the heightened focus on national and international security leads countries to bulk up their military posture, it generates demand for U.S. defense contractors.
Third-quarter government spending increased 20% to 25% year over year, Seaport Global analyst Richard Safran wrote in a research note last week. He expects average Q3 revenue growth of 4% to 5% for large-cap defense firms and is "leaning positive" into the space ahead of earnings reports. Companies that provide 2023 outlooks could potentially beat Wall Street's low or modest expectations, Safran noted.
Some of the defense contractor's stocks are basing ahead of their announcements. But it's always risky to purchase stocks ahead of earnings results. An earnings or revenue miss could cause unexpected price swings. Meanwhile, the market has confirmed a new uptrend, but the underlying economic and market volatility gives investors good cause to remain cautious.
Raytheon Earnings
Raytheon Technologies, maker of Stinger and Javelin missiles, is coming off five consecutive quarters of decelerating earnings and revenue growth. Wall Street expects that streak to continue for its third quarter earnings results Tuesday morning.
Expectations: Adjusted earnings were forecast to fall 9.5% to $1.14 per share while revenue climbed 6.2% to $17.23 billion.
Results: Raytheon's earnings slid 3.9% to $1.21 per share on 4.6% revenue growth to $16.95 billion.
Sales for its Collins Aerospace subsidiary rose 11% year-over-year to $5.1 billion, driven by a 25% increase in commercial aftermarket sales. And its Pratt & Whitney segment sales jumped 14% to $5.38 billion on higher commercial equipment and aftermarket revenue. However, Raytheon Missiles & Defense sales fell 6% to $3.7 billion as the company continues to face supply chain constraints for its Land Warfare, Air Defense and Naval Power programs. And sales for the Raytheon Intelligence & Space segment slid 3% as Raytheon divested its Global Training and Services business.
Raytheon also cut its fiscal 2022 revenue forecast to $67 billion to $67.3 billion, from a range of $67.75 billion to $68.75 billion. And narrowed its adjusted EPS outlook to $4.70 to $4.80, from earlier views of $4.60 to $4.80.
RTX stock has been consolidating since a failed breakout from a flat base back in April. Shares rose another 1.5% on Thursday after rebounding nearly 2.5% on Wednesday. RTX stock fell 1.5% on Tuesday following its report.
General Dynamics Earnings
General Dynamics announces results Wednesday morning. The company manufactures various business jets, combat vehicles, ships, submarines, communications and weapons systems. Its portfolio includes Gulfstream jets, AbramsX tanks and the technology powering fighter jets like the F/A-18 Super Hornet.
Expectations: Wall Street saw General Dynamics earnings increasing 2.6% to $3.15 per share on a 3.7% revenue increase to $9.9 billion.
Results: General Dynamics earnings rose to $3.26 per share and revenue increased to $10 billion.
General Dynamics reported strong demand for its Aerospace, Marine and Combat Systems, all of which saw year-over-year revenue increases. The aerospace segment sales led the growth and jumped 13.6% to over $2.3 billion. General Dynamics' delivery backlog widened by $88.8 billion during the quarter, bringing the total to $125.8 billion.
GD stock is tinkering with a buy point at 244.18. The current flat base pattern formed within a larger, seven-month consolidation. IBD MarketSmith plots a standard entry at 255.09. The stock's relative strength hit new highs ahead of results.
GD stock rose 1% on Thursday after ending flat Wednesday.
Northrop Grumman Earnings
Northrop Grumman provides counter-artillery equipment, radars and surveillance aircraft and systems. It also manufactures F-35 fighter jets with Lockheed Martin, which are some of the company's biggest revenue generators. Northrop's earnings and revenue have declined for the past three quarters.
Expectations: For its Thursday results, analysts projected Northrop Grumman's adjusted earnings would fall 7.8% to $6.11 per share on 4.7% revenue growth to $9.13 billion.
Results: Northrop's earnings fell to $5.89 per share and revenue grew to $9 billion.
Northrop's Aeronautics and Defense System sales fell by 7% and 5%, respectively. While its Space Systems revenue rose 18% to $3.16 billion.
The company maintained its 2022 guidance, but said sales and EPS will be near the lower end of its forecast. Northrop expects earnings of $24.50 to $25.10 per share on revenue between $36.2 billion and $36.6 billion for the year.
NOC stock broke out of a double bottom base in early August, and has pressed to recent new highs. Its Relative Strength Rating is at 95 out of a possible 99 ahead of its report.
Shares of NOC stock edged up about 1% in Thursday trading after sliding 3% premarket following the results.
L3Harris Technologies Earnings
Intelligence and surveillance equipment and technology provider L3Harris reports earnings Friday morning. The company produces a number of maritime, defense and commercial aviation vehicles. As well as space systems, mission networks and tactical and broadband communications. L3Harris' earnings and revenue declined the past two quarters, but analysts predict a rebound for Q3.
Expectations: Wall Street forecasts L3Harris earnings will climb 5.6% to $3.39 per share on 4.2% revenue growth to $4.4 billion.
Results: L3Harris adjusted earnings rose 1.5% to $3.26 per share. While revenue grew 3% to $4.2 billion.
L3Harris also cut its outlook for full year earnings and revenue. The company expects EPS to range from $12.75 to $13.00, from its previous view of $13.35 to $13.65. And lowered revenue predictions to $16.8 billion, from previous expectations of $17.3 billion to $17.7 billion.
LHX stock is climbing the right side of a cup base ahead of its results. Its relative strength is at a new high. Shares are about 12% below a standard buy point of 279.81. Aggressive investors could sight in on an early entry around 248.63, but those who decide to buy ahead of earnings should be highly cautious.
LHX stock fell more than 2% on Friday after shares dropped 4.15% during premarket trading.
Booz Allen Hamilton Earnings
Cybersecurity, data and technology consulting firm Booz Allen Hamilton reports results Friday morning. Booz Allen stock's relative strength is at a new high leading up to its report.
Expectations: Analysts expect earnings to dip 10% to $1.13 per share while revenue rises 7% to $2.26 billion.
Results: Adjusted earnings rose 6.3% to $1.34 per share on 9% revenue growth to $2.3 billion.
Booz Allen raised its full year guidance with the performance. It forecasts 8% to 10% revenue growth for the year, up from the previous outlook of 5% to 9% growth. And adjusted earnings are expected to range from $4.25 to $4.50 per share, increasing from the prior estimate of $4.15 to $4.45.
BAH stock is trading in a buy zone after a breakout from a flat base. Shares broke out last Friday, passing the buy point of 99.41. The buy zone extends to 104.38.
BAH stock jumped more than 5% by afternoon trading Friday following the results, sending shares clear of the buy zone.
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