Top defense stocks are at or near buy range, ahead of first-quarter results from Lockheed Martin (LMT), Boeing (BA), Raytheon (RTN), Northrop Grumman (NOC) and General Dynamics (GD) in the coming week.
Lockheed Martin
Lockheed kicks off a busy week for defense stocks, reporting Q1 results before the market opens Tuesday.
Analysts expect the F-35 maker to report a 4.6% increase in EPS to 34 cents but revenue is seen falling 18% to $11.3 billion, according to Zacks Investment Research.
The Pentagon stopped taking deliveries of the F-35 recently over a contract dispute on correcting production errors. It’s unclear if this pause happened in Q1 or Q2 but Lockheed could give more details about the issue and when it might be resolved.
Earlier, a company spokesperson told Reuters that Lockheed was “confident we will meet our delivery target of 91 aircraft for 2018.”
Lockheed shares are 3% below a 363.10 cup base entry point and above their 50-day average, with the relative strength line near highs.
Boeing
The defense and aerospace giant reports early Wednesday. Analysts see Boeing reporting a 28% EPS jump to $2.56 with revenue up 5.8% to $22.2 billion.
Issues with the KC-46 tanker for the Air Force have plagued Boeing in recent quarters. It’s booked charges of $2.9 billion before taxes, or $1.9 billion after-tax, on the fix-cost price contract that leaves Boeing on the hook for any overruns. But analysts don’t see another charge in Q1.
“We do not expect Boeing to necessarily take a charge on the program this quarter, but we do expect additional charges before the delivery of the initial 18 aircraft,” Ken Herbert, a Canaccord Genuity analyst, wrote in a note.
On the commercial side, Boeing announced this month that Q1 passenger jet deliveries rose 9% to 184. Analysts are also waiting to hear if Boeing has firmed up plans for a new midmarket plane to take on Airbus’ (EADSY) A321neo.
Embraer (ERJ) will report Q1 results Friday. Boeing is looking at acquiring some or all of the Brazilian aerospace company or forming a joint venture to help possibly design and build the new midmarket plane.
Boeing shares are consolidating but at 9% below a 371.70 entry with a lagging RS line, making it one of the laggards among the top aerospace and defense stocks. The stock dipped back below its 50-day line on Friday.
Northrop Grumman
Northrop Grumman reports early Wednesday. Analysts expect a 26% jump in EPS to $3.63 and a 5% increase in revenue to $6.58 billion.
Northrop will will likely stay tight lipped about its top-secret B-21 bomber. But the RQ-4 Global Hawk drone maker could be a major beneficiary of President Trump’s looser and more streamlined foreign arms policy.
Trump wants the State Department to speed up approvals of foreign military sales within 60 days. He also wants to allow defense contractors to directly sell U.S. military drones to foreign governments without first going through the Defense Department.
Northrop shares are 1% below a 359.53 flat base entry after briefly clearing that mark earlier this month. The stock remains above its 50-day, and the RS line is near highs.
General Dynamics
General Dynamics will also report Q1 results Wednesday.
Analysts expect a 0.4% EPS dip to $2.47 and a 1.3% rise in revenue to $7.54 billion.
Shares are consolidating in a flat base and just 3% below a 230.10 entry point, though the RS line is off highs.
Raytheon
Raytheon is expected to post a 21% EPS jump to $2.09 and a 5% revenue gain to $6.58 billion on Thursday.
Expect lots of talk about Raytheon’s missile-defense products like the Patriot, with demand up as tensions heat up in the Middle East, Europe and Asia. Management could also discuss other foreign sales and Trump’s lifting of export red tape.
Last month, the State Department cleared the way for Saudi Arabia to buy nearly 6,700 Raytheon anti-tank missiles following Crown Prince Mohammed bin Salman’s visit to Washington.
Raytheon shares remain in buy range after breaking out of a flat base on Friday.
