Where Do Aerospace and Defense Stocks Go From Here?

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Two of the country’s biggest defense contractors reported fourth-quarter and full-year earnings before markets opened Wednesday morning. One traded up about 5.5% and the other traded down about 5.9% in the first half-hour of the regular session.

As a whole, aerospace and defense stocks have added more than 13% so far in the month of January, more than double the near 6% rise in the S&P 500 index. But results have been mixed for the firms that already have reported, and the outlook is not particularly bright for those that have yet to post earnings.

Here’s a look at eight aerospace and defense firms, along with their share price gains for the year to date, their stock price change since reporting (if they have), and their expected results for the coming year.

Lockheed Martin

Lockheed Martin Corp. (NYSE: LMT) reported fourth-quarter and full-year 2018 results Tuesday that were acceptable but not great. Shares closed up nearly 1.5% on the day and gave back most of that gain on Wednesday. Following yesterday’s earnings report, the stock was maintained as Buy at Argus, with the firm noting that weakness after earnings represents a buying opportunity.

Since January the stock had gained nearly 11% as of Tuesday’s close. Lockheed’s outlook for 2019 calls for revenues in the range of $55.75 to $57.25 billion and diluted EPS of $19.15 to $19.45. Analysts had forecast EPS of $19.55 and revenues of $56.23 billion. Shares traded down about 0.5% Wednesday, at $290.69 in a 52-week range of $241.18 to $363.00. The consensus 12-month price target is $343.37.

Boeing

Boeing Co.’s (NYSE: BA) Wednesday morning earnings announcement added nearly 7% to the company’s 13% year-to-date gain as of Tuesday’s closing bell. Not only that, the aerospace giant has forecast deliveries of around 900 commercial jets this year, topping the 806 it delivered last year. Boeing also forecast 2019 sales and profits well north of analysts’ consensus estimates.

Boeing’s defense, space and security division posted a gain of 13% in full-year revenues, but earnings from operations were down 27% and operating margin was down 3.8%. The fourth quarter showed a year-over-year gain of 16% in revenues, 23% in earnings and 0.6% in margin. For this year, Boeing forecast division revenue growth of 14% to 18% and margin growth to more than 15%. Shares traded up more than 7% in the noon hour Wednesday, at $390.72 in a 52-week range of $292.47 to $394.28. The consensus 12-month price target is $415.71.

General Dynamics

General Dynamics Corp. (NYSE: GD) also reported quarterly and full-year results Wednesday morning, and the news from the tank maker was good. What was less good was the outlook, which fell short of the consensus estimates for earnings per share of $12.04 and revenue of $39 billion for 2019. Neither miss was very big, but close doesn’t count these days. As of last night’s close, the stock was up 12% for the year to date, but it traded down in the late morning Wednesday.

The company also boosted 2018 revenues and profits with its 2018 acquisition of defense IT vendor CRSA. The outlook for IT services is flat for 2019, so if the company is going to see any growth it likely will come from the non-defense Gulfstream private jet market. Shares traded down nearly 4% Wednesday to $169.09, in a 52-week range of $143.87 to $230.00. The consensus 12-month price target is $201.63.

UTC

United Technologies Corp. (NYSE: UTX) reported results last week that included a 73% jump in quarterly profit, largely due to the completion of its merger with Rockwell Collins. Just in time for UTC, as the company is known, to break itself into three pieces: a defense business that includes Pratt & Whitney jet engines as well as Rockwell, the Otis elevator business and the Carrier building-systems business.

The other part of UTC’s good numbers was lower taxes, a bonus that all companies will see disappear this year. Following the earnings report, UTC shares were raised to Sector Perform at RBC, with a price target of $129, while Bank of America and Goldman Sachs reiterated Buy ratings and price targets of $185 and $149, respectively. Shares were up 10.7% for the year to date and traded in the noon hour Wednesday at $119.18, up 1.1% for the day, in a 52-week range of $100.48 to $144.15. The consensus 12-month price target is $140.06.