Defense stocks report second-quarter results this week and Raytheon (RTX) kicked things off premarket Tuesday by extending its impressive streak of earnings surprises. But RTX stock fell roughly 4.5% throughout the trading day after the results.
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Declines in missile and defense sales for the fighter jet and missile systems maker caused it to fall short on revenue expectations for the fourth consecutive quarter. The company reaffirmed its full year outlook based on its performance.
Still, Raytheon extended its streak of earnings beats to 21 consecutive quarters. Raytheon earnings rose 12.6% year over year to $1.16 per share. Revenue climbed 3% to $16.3 billion. Wall Street expected 8.7% year-over-year earnings growth to $1.12 per share and 4.4% revenue growth to $16.6 billion.
“A strong start to the summer travel season drove continued top-line growth and adjusted EPS that exceeded our expectations,” Chief Executive Greg Hayes said in the earnings announcement. “Resilient end-market demand along with our differentiated technology solutions generated over $24 billion of awards in the quarter.”
In June, Raytheon announced it’s establishing its global headquarters in Arlington, Va. Further, the company landed a $4.4 billion contract with the Navy for fighter jet propulsion systems. In July, the Army awarded Raytheon a $353.93 million contract to produce prototype missile defense radars.
Raytheon generated $807 million in free cash flow for the quarter, which fell 16% over the year. Its missile and defense revenue fell 11% to $3.56 billion for the period. Supply chain constraints caused the segment’s operating profit to fall 35% to $348 million. Wall Street predicted $1.3 billion of free cash flow and Raytheon Missile and Defense sales of $3.9 billion for the second quarter.
Defense Stocks: Raytheon Stock Outlook
“Looking ahead, while we expect the global supply chain environment, labor availability and inflation will remain challenging near term, we are actively engaged with our customers and suppliers to meet demand and remain cost competitive,” Hayes said. “We continue to be focused on strategic investments in technology and innovation that will drive our industry leadership today and into the future.”
The company repurchased $1 billion of RTX stock during the period. And Raytheon confirmed plans to repurchase $2.5 billion shares for 2022.
Raytheon reaffirmed its full year outlook in the announcement. It predicts earnings of $4.60 to $4.80 per share, well below the consensus estimate of $4.96 per share. And Raytheon expects FY2022 revenues of $67.75 billion to $68.75 billion with $6 billion of free cash flow. Wall Street anticipates $63.8 billion of revenue for the year.
General Dynamics, Northrop Grumman Stock Preview
Among other defense stocks, Northrop Grumman (NOC) and General Dynamics (GD) also report tomorrow and Thursday.
Analysts expect General Dynamics to report 4% earnings growth to $2.72 per share, and 2.2% revenue growth to $9.4 billion.
Northrop Grumman has outperformed its peers lately but Wall Street expects results to slide for the second quarter. Analysts predict earnings for NOC stock will drop 6% to $6.04 per share. And Wall Street expects revenue to decline to $9.07 billion from $9.15 billion last year.
This story will be updated throughout the day.
You can follow Harrison Miller for more stock news and updates on Twitter @IBD_Harrison.
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Source: https://www.investors.com/news/defense-stocks-raytheon-general-dynamics-northrop-grumman/?src=A00220&yptr=yahoo