The Zacks Aerospace sector saw Q4 results from only 10% of the constituent stocks, as of Jan 25. While these companies reported earnings growth of 41.6% year over year, revenues declined 6.6% in the current reporting cycle.
These quarterly numbers caused the major indices of the Aerospace-Defense space to end in the green over the trailing five trading sessions. Notably, the S&P 500 Aerospace & Defense (Industry) and the Dow Jones U.S. Aerospace & Defense index gained 4% in the aforementioned time period.
Among the past week’s highlights, quarterly results from a number of Aerospace-Defense majors, namely, Textron Inc. TXT, Lockheed Martin Corp. LMT, The Boeing Company BA, United Technologies, Corp. UTX, L3 Technologies, Inc. LLL, Harris Corp. HRS and General Dynamics Corp. GD remained a key area of investors’ focus.
Recap of Past Week’s Important Stories
1. Textron reported fourth-quarter 2018 adjusted earnings from continuing operations of $1.15 per share, which surpassed the Zacks Consensus Estimate of 98 cents by 17.3%. Earnings were up 55.4% year over year on improved segment profit.
Total revenues came in at $3,750 million, which fell short of the Zacks Consensus Estimate of $3,921 million by 4.4%. Cash flow from operating activities amounted to $1,109 million at the end of 2018 compared with $963 million at the end of 2017.
At the end of the quarter, order backlog at the company’s Bell segment’s totaled $5.8 billion, up a mere $0.1 billion from the figure registered in the preceding quarter (read more: Textron's Q4 Earnings Beat, Revenues Miss Estimates).
2. Lockheed Martin’s fourth-quarter 2018 earnings of $4.39 per share came in line with the Zacks Consensus Estimate. The company’s net sales amounted to $14.41 billion, outshining the Zacks Consensus Estimate of $13.82 billion by 4.3%.
Lockheed Martin ended 2018 (on Dec 31, 2018) with $130.5 billion in backlog, up 23.7% from $105.5 billion at the end of 2017. Its cash and cash equivalents totaled $0.77 billion as of Dec 31, 2018, compared with $2.86 billion at the end of 2017.
During 2018, the company repurchased 4.7 million shares for $1.5 billion compared with 7.1 million share buyback for $2 billion a year ago. In 2019, Lockheed Martin expects to deliver earnings per share in the $19.15-$19.45 band (read more: Lockheed Martin Q4 Earnings In Line, Sales Top Estimates).
3. Boeing’s adjusted earnings of $5.48 per share for fourth-quarter 2018 surpassed the Zacks Consensus Estimate of $4.52 by 21.2%. Revenues amounted to $28.34 billion, which improved 14% year over year.
Reported backlog included $27 billion of net orders during the fourth quarter. Additionally, Boeing delivered 238 commercial planes, up 14% in the same time period.
It exited 2018 with cash and cash equivalents of $7.64 billion, and short-term and other investments of $0.93 billion. Boeing generated $15.32 billion of operating cash flow at the end of 2018, up 14.9% year over year (read more: Boeing Q4 Earnings Top on Higher Revenues Y/Y, Backlog Up).
4. United Technologies’ fourth-quarter adjusted earnings came in at $1.95 per share, surpassing the Zacks Consensus Estimate of $1.51. Revenues totaled $18,044 million, up 15.1% year over year.
The company exited 2018 with cash and cash equivalents of $6,152 million compared with $8,985 million registered in the previous year. Moreover, United Technologies generated net cash of $6,322 million from operating activities, up from $5,631 million recorded a year ago.
Its adjusted earnings are anticipated to lie within the $7.70-$8.00 per share range in 2019 (read more: United Technologies' Q4 Earnings and Revenues Beat).
5. L3 Technologies’ fourth-quarter 2018 adjusted earnings of $3.10 per share from continuing operations surpassed the Zacks Consensus Estimate of $2.66 by 16.5%. Meanwhile, total revenues came in at $2.77 billion, which outpaced the Zacks Consensus Estimate of $2.72 billion by 1.8%.
Funded orders in the fourth quarter totaled $2.95 billion, reflecting an 8% rise from the year-ago quarter number.
At the end of 2018, net cash flow from operating activities amounted to $1,042 million compared with the year-ago cash flow of $985 million. For 2019, L3 Technologies anticipates net sales of $10.75 billion (read more: L3 Technologies Q4 Earnings & Revenues Beat Estimates).
6. Harris Corp.’s GAAP earnings from continuing operations increased to $1.88 per share in the second quarter of fiscal 2019 from $1.08 in the year-ago quarter. Quarterly revenues increased 9% year over year to $1,666 million.
In the first half of fiscal 2019, Harris generated $469 million of cash from operating activities compared with $373 million in the year-ago period. Also, the company returned $363 million to shareholders through dividends and share repurchases during the same time frame (read more: Harris Trumps Q2 Earnings & Revenue Estimates, Ups View).
7. General Dynamics’ fourth-quarter earnings from continuing operations of $3.07 per share exceeded the Zacks Consensus Estimate of $2.98 by 3%. Revenues amounted to $10,378 million, which edged past the Zacks Consensus Estimate of $10,286 million by 0.9%.
The company recorded a total backlog of $67.9 billion, up 7.4% annually.
As of Dec 31, 2018, General Dynamics’ cash provided by operating activities were $3,148 million compared with $3,876 million in the year-ago period. Free cash flow from operations at the end of 2018 was $2.5 billion compared with $3.45 billion at 2017-end (read more: General Dynamics Beats on Q4 Earnings, Sales Up Y/Y).
Performance
Over the past five trading sessions, the defense biggies put up a solid show. L3 Technologies gained the most with 9% increase in share price, followed by Boeing.
However, the industry's performance over the last six months has been mixed. While shares of Boeing gained a solid 10.4%, General Dynamics lost 11.8%.
The following table shows the price movement of the major defense players over the past five trading days and during the last six months.
| Company | Last Week | Last 6 Months |
| LMT | 2.43% | -8.88% |
| BA | 8.26% | 10.44% |
| GD | 0.01% | -11.81% |
| RTN | 3.06% | -4.10% |
| NOC | 4.06% | -0.14% |
| TXT | 3.06% | -14.23% |
| LLL | 8.95% | 2.44% |
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