BA, GD Q4 Earnings Due On Jan 30: Here Are The Key Predictions

As of Jan 25, 113 S&P 500 members have reported quarterly numbers. So far, the overall earnings scenario is not a very impressive one.

While quarterly earnings of the 113 S&P members — constituting 22.6% of the index’s total membership — increased 12.4%, revenues rose 6.5% from the fourth-quarter 2017 level. The beat ratio for the bottom line was 67.3%, whereas that for the top line was 58.4%.

Coming to projections for the Aerospace sector, which constitutes defense stocks, total Q4 earnings are expected to increase 7.5% year over year on 5.8% higher revenues. For more details on quarterly releases, you can go through the latest Earnings Preview.

Defense stocks, which have been on a growth trajectory over the past couple of quarters, continued to witness a flourishing Q4 on President Trump’s favored stance toward increased spending on defense majors. In this regard, it is imperative to mention that America’s expansionary defense budget has been significantly providing a boost to major defense contractors. According to a Bloomberg report, the United States increased missile defense spending by 25% to $9.9 billion in fiscal 2019. As a result, a steady flow of contracts from the Pentagon continued to provide impetus to the stocks. Defense contractors also received a string of key contracts from foreign allies of the United States, hinting at growing international market for weaponries.

With almost 400 companies (121 S&P 500 members) slated to report Q4 results this week, let's find out how the following defense stocks are placed ahead of their earnings release on Jan 30.

The Boeing Company (NYSE:BA) delivered a positive earnings surprise of 3.77% in the last reported quarter. Also, the company outperformed the Zacks Consensus Estimate in the trailing four quarters, the average being 28.01%.

Being the largest aircraft manufacturer and one of the major aerospace and defense contractors in the United States, Boeing enjoys a solid inflow of contracts from both the Pentagon as well as foreign allies owing to the company’s varied product offerings. Such solid order growth must have boosted Boeing’s backlog count, which should get duly reflected in the upcoming quarterly results.

Increased volumes projected at the defense business should bolster Boeing’s overall revenue growth. Meanwhile, charges related to Boeing’s planned investments in the newly-awarded T-X Trainer and MQ-25 unmanned aircraft, and cost growth on the KC-46 Tanker are expected to hurt its total earnings.

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has high chances of beating estimates if it also has a positive Earnings ESP. Impressively, Boeing constitutes that right combination. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Boeing has an Earnings ESP of +0.31% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Please note that we caution against stocks with a Zacks Rank #4 (Sell) or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions (read more: Can Higher Volumes & Deliveries Aid Boeing's Q4 Earnings?).

General Dynamics Corp. (NYSE:GD) reported earnings surprise of 5.47% in the last reported quarter. The company also outperformed the Zacks Consensus Estimate in the trailing four quarters, with an average beat of 7.88%.

General Dynamics, being the largest military shipbuilders in the United States, enjoys a steady flow of orders from both the Pentagon and its foreign allies. Such steady order flow usually boosts the company’s quarterly backlog as well as its top line. We may expect the upcoming quarterly results to duly reflect these factors.

General Dynamics’ Aerospace segment’s revenues are expected to receive solid boost in Q4, with the expected delivery of 8-10 G500s. In Q3, the CSRA acquisition turned out to be modestly accretive to revenues and we expect the Q4 results to reflect the same.

General Dynamics has an Earnings ESP of +1.49% and a Zacks Rank #3, which make us confident about an earnings beat this quarter (read more: Strong Order Growth to Fuel General Dynamics Q4 Earnings).

Wall Street’s Next Amazon (NASDAQ:AMZN)

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.

Click for details >>