Defense Stocks: General Dynamics Tops Views After Raytheon Cuts Revenue Outlook

General Dynamics (GD) reported better-than-expected first-quarter earnings early Wednesday, after Raytheon Technologies (RTX) delivered mixed results Tuesday and cut its revenue outlook. General Dynamics stock was little changed before the open.

More defense companies, including Northrop Grumman (NOC), report later this week. All trading near buy points within short bases.




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General Dynamics Earnings

Estimates: General Dynamics was expected to see a 1% EPS uptick to $2.51 despite a 4% sales drop to $8.996 billion.

Results: General Dynamics earnings rose 5% to $2.61 a share with revenue just edging higher to $9.4 billion.

Boeing (BA) also reports early Wednesday.

General Dynamics Stock

GD sank 0.9% to 236.93 Tuesday with the RS line making a new high, seen on the weekly MarketSmith chart. General Dynamics stock rebounded off the  50-day average Monday. GD stock has formed a flat base with a 255.09 buy point.

Raytheon Earnings

Estimates: Analysts polled by FactSet expect Raytheon Technologies earnings to rebound 13% to $1.01 per share on a 4% sales bounce to $15.798 billion.

Results: Raytheon earnings rose 28% to $1.15 a share while revenue advanced 3% to $15.72 billion. Sales rose 10% year over year at the Collins Aerospace unit and rose 12% at Pratt & Whitney. It fell 5% at Raytheon Intelligence & Space and fell 7% at Raytheon Missiles & Defense.

Outlook: For the full year, Raytheon now sees revenue of $67.75 billion-$68.75 billion, down from $68.5 billion-$69.5 billion. It reaffirmed EPS guidance of $4.60-$4.80. At the midpoint, the updated earnings and sales guidance are both slightly below FactSet analyst consensus.

Global sanctions on Russia drove the sales cut, Raytheon Technologies said in Tuesday’s release. Raytheon CFO Neil Mitchill later told Reuters that the revenue cut “was strictly related to direct and indirect sales that are no longer allowed because of the global sanctions imposed on Russia.”

About three quarters of that lost $750 million revenue was direct sales of commercial equipment to Russia, Mitchill said, and the remainder was engine parts that would have been sold principally by Pratt & Whitney Canada.

“We remain confident in the long-term outlook for our businesses, supported by the return to travel and growing global defense budgets,” Raytheon CEO Greg Hayes said in Tuesday’s release.

The aerospace and defense giant confirmed on Tuesday plans for $2.5 billion in RTX stock buybacks during 2022.

Raytheon, with Lockheed, makes the Javelin anti-tank missile used effectively by Ukrainian troops vs. Russian armored vehicles.

Raytheon Stock

Shares dipped 0.4% to 99.19 on the stock market today, pennies below its 50-day moving average. Raytheon stock dipped 0.9% on Monday, but recovered to close above the 50-day after nearly triggering an automatic sell signal from a 104.44 flat-base buy point.  The relative strength line for RTX stock remains near highs after a solid rally in the past year.

Northrop Grumman Earnings

Estimates: Northrop Grumman is likely to post a 9% EPS decline to $5.96 on a 3% sales decline to $8.877 billion.

Results: Check back early Thursday.

Northrop Grumman Stock

Shares of Northrop Grumman (NOC) gave up 0.3% to 442.51, just above the 50-day line. Northrop Grumman stock successfully broke out after the Russian invasion. It has formed a new cup-with-handle base with a 477.36 buy point above longer consolidations, backed by a rising RS line.

As the B-21 Raider bomber jet production ramps up, the U.S. Air Force on April 7 awarded Northrop Grumman a $108 million contract to buy needed parts in advance.

L3Harris Technologies Earnings

Estimates: Analysts forecast a 4% decline in L3Harris Technologies earnings to $3.06 per share. Revenue is seen sliding 9% to $4.142 billion.

Results: Check back early Friday.

L3Harris Stock

Shares of L3Harris Technologies (LHX) fell 1.1% to 240.35 after undercutting its 50-day line on Monday. L3 Harris Technologies stock has a short base with a 279.81 buy point on top of a longer consolidation. The RS line for LHX stock remains not far off highs.

Defense Spending Hits $2.113 Trillion

Global military spending topped $2 trillion for the first time, a new report Monday said.  It grew by 0.7% last year to reach $2.113 trillion, according to the Stockholm International Peace Research Institute. The growth trend is likely to intensify this year, as Europe hikes defense spending after the Feb. 24 Russian invasion of Ukraine.

Defense stocks surged in late February on expectations of higher spending. But last week Lockheed Martin (LMT) earnings took a hit from supply disruptions due to the Covid-19 omicron variant and rising inflation.


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