With 26% of the S&P 500 members having reported their quarterly numbers as of Jan 26, we are in the thick of the fourth-quarter earnings season. So far, the results reflect a positive trend, with an above average proportion of companies beating top- and bottom-line expectations. As the reporting cycle gets underway, the earnings scenario will most likely show more favorable trends.
Annual earnings for the 133 index members that have released their Q4 results have improved 12.3%, while revenues increased 8.8%. The beat ratio for the bottom line was 81.2%, while that for the top line was 78.9%, as of Jan 26.
Coming to the Aerospace sector, we saw General Dynamics Corp. GD kick-starting the Q4 reporting cycle with its earnings release on Jan 24. The next day saw reports from Raytheon Company RTN, L3 Technologies Corp. and Northrop Grumman Corp. NOC. This week, defense prime Lockheed Martin Corp. LMT also came up with its financial results.
Projections for the Aerospace sector (one of the 16 Zacks sector), hint at an impressive quarter, when compared to its Q3 performance.
The sector’s earnings are likely to improve 8.2% on 6% higher revenues in the fourth quarter. In the third quarter, earnings for this sector declined 6.8% on 4.4% sales growth. For more details on quarterly releases, you can go through our latest Earnings Preview.
Defense stocks remained on a growth trajectory in the fourth quarter, courtesy of the various defense policy initiatives adopted by President Trump. A steady flow of contracts from Pentagon also provided an impetus to the stocks. With Trump strongly opposing the budget sequestration imposed by his predecessor, defense stocks are likely to gain traction in the coming days. Moreover, growing international market for weaponries with more developing nations expanding their defense spending is also likely to fuel the industry’s growth.
With almost 400 companies (121 S&P 500 members) slated to report their Q4 results this week, let’s take a look at the three defense stocks, Teledyne Technologies, Esterline Technologies and Triumph Group that are scheduled to announce their Q4 results on Feb 1.
Teledyne Technologies Incorporated TDY delivered a positive earnings surprise of 21.02% in the last quarter. Notably, the company outperformed the Zacks Consensus Estimate in the trailing four quarters, with an average beat of 37.17%.
TheZacks Consensus Estimate for the company’s fourth-quarter revenues is pegged at $670.6 million, reflecting year-over-year growth of 21.3%. The same for the quarterly earnings is pegged at $1.74 per share, which represents 5.5% annual improvement.
Per our proven model, a stock is likely to beat earnings estimate if it has a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Teledyne Technologies currently does not constitute that right combination.
The Zacks Rank #3 company has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Please note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Teledyne Technologies Incorporated Price and EPS Surprise
Teledyne Technologies Incorporated Price and EPS Surprise | Teledyne Technologies Incorporated Quote
Esterline Technologies Corporation ESL reported a negative earnings surprise of 16.99% in the prior quarter. However, the company outperformed the Zacks Consensus Estimate in two of the trailing four quarters, the average positive surprise being 19.06%.
TheZacks Consensus Estimate for the company’s fourth-quarter revenues is pegged at $461.7 million, reflecting year-over-year growth of 0.9%. The same for the quarterly earnings is pegged at 46 cents per share, which represents 43.9% annual decline.
The Zacks Rank #5 company has an Earnings ESP of +22.40%. Therefore, Esterline Technologies is unlikely to beat on earnings this quarter.
Esterline Technologies Corporation Price and EPS Surprise
Esterline Technologies Corporation Price and EPS Surprise | Esterline Technologies Corporation Quote
Triumph Group, Inc. TGI posted a negative earnings surprise of 142.31% in the prior quarter. Moreover, the company underperformed the Zacks Consensus Estimate in the trailing four quarters, the average negative earnings surprise being 133.51%.
TheZacks Consensus Estimate for the company’s fourth-quarter revenues is pegged at $776 million, reflecting a year-over-year decline of 8.2%. The same for the quarterly earnings is pegged at 68 cents per share, which represents 15.3% annual improvement.
The Zacks Rank #3 company has Earnings ESP of -9.92%.You can see the complete list of today’s Zacks #1 Rank stocks here.
Therefore, Triumph Group is unlikely to beat on earnings this quarter.
Triumph Group, Inc. Price and EPS Surprise
Triumph Group, Inc. Price and EPS Surprise | Triumph Group, Inc. Quote
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