A number of defense companies roll out earnings this week after Lockheed Martin’s strong results last week. Raytheon Technologies (RTX) reports on Tuesday, with General Dynamics (GD), Northrop Grumman (NOC), Booz Allen Hamilton (BAH) and L3Harris Technologies (LHX) each announcing on subsequent days. RTX stock edged up on Monday ahead of its report. Meanwhile shares of GD, NOC, BAH and LHX were relatively unchanged before their earnings.
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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 are forecast to fall 9.5% to $1.14 per share while revenue climbs 6.2% to $17.23 billion.
RTX stock has been consolidating since a failed breakout from a flat base back in April. Shares of RTX rose more than 1.5% Monday, before its Tuesday 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 sees General Dynamics earnings increasing 2.6% to $3.15 per share on a 3.7% revenue increase to $9.9 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 is at new highs ahead of results.
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 project Northrop Grumman’s adjusted earnings will fall 7.8% to $6.11 per share while revenue grows 4.7% to $4.68 billion.
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.
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.
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 reports on Friday.
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.
LHX stock is climbing the right side of a cup base ahead of its Friday morning 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.
You can follow Harrison Miller for more stock news and updates on Twitter @IBD_Harrison
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