Aerospace & Defense Q2 Earnings: Hit or Miss for ETFs?

The U.S. economy is gradually witnessing improving COVID-19 conditions. The prospects for all the U.S. sectors are becoming brighter as demand is growing amid reopening global economies. Although the supply-chain disturbances are an overhang.

The players in the aerospace and defense spaces so far had struggled with business-related issues like increased coronavirus-related costs, delays in supplier deliveries, impacts of travel restrictions, and the effects of remote work and adjusted work schedules to some extent.

But Q2 of 2022 earnings could be a turning point as global economy is reopening and many companies are opting for on-site operations, not remote (at least partially). The national defense total in the 2022 omnibus spending bill is $782 billion, a 3.9% rise over the administration’s request for 2022 and a 5.6% increase over the 2021 appropriations.

Against this backdrop, aerospace and defense earnings are worth a watch. Most big players in the sector came up with mixed earnings. However, some companies offered assuring outlook.

To give a better idea about the second-quarter earnings results we highlight the performance of some major players in the space:

Earnings in Focus

Boeing BA’s second-quarter results fell short of analysts’ estimates. Weakness in its defense unit weighed on results, but was partly offset by strength in its commercial airplane unit. Aircraft deliveries rose to 121 in the second quarter from 79 a year ago, while commercial aircraft revenue rose 3% to more than $6.2 billion, per a CNBC article.

Boeing’s adjusted loss per share was 37 cents in Q2 versus expected loss of 14 cents. Reported revenues of $16.68 billion also fell short of $17.57 billion. Boeing swung to operating cash flow of $81 million in the quarter after burning $483 million in the same period last year. Boeing stock rose just after the earnings release on Jul 27 as the company reaffirmed expectations for positive free cash flow for the full year.

The Boeing earnings report comes after its jet-engine suppliers General Electric GE and Raytheon RTX both hinted at a robust recovery in global commercial air travel and growth in new plane orders, as indicated by Investors’ Business Daily.

General Dynamics GD came out with quarterly earnings of $2.75 per share, beating the Zacks Consensus Estimate of $2.72 per share. This compares to earnings of $2.61 per share a year ago. These figures are adjusted for non-recurring items.

General Dynamics posted revenues of $9.19 billion for the quarter ended June 2022, missing the Zacks Consensus Estimate by 2.12%. This compares to year-ago revenues of $9.22 billion. The company has topped consensus revenue estimates just once over the last four quarters.

Lockheed Martin Corporation LMT reported second-quarter 2022 earnings of $6.32 per share, which surpassed the Zacks Consensus Estimate of $6.29 by 0.5%. The bottom line however declined 1.6% year over year.

In the reported quarter, net sales amounted to $15.45 billion, which missed the Zacks Consensus Estimate of $16.16 billion by 4.4%. The top line also declined 9.3% from $17.03 billion reported in the year-ago quarter.

Lockheed Martin ended the second quarter of 2022 (on Jun 26, 2022) with $134.64 billion in backlog compared with $135.23 billion at the end of first-quarter 2022. However, Lockheed Martin slightly lowered its revenues and earnings guidance for 2022. The company has maintained its free cash flow guidance at $6 billion for 2022.

Northrop Grumman Corporation NOC reported second-quarter 2022 earnings of $6.06 per share, which surpassed the Zacks Consensus Estimate of $6.03 by 0.5%. The bottom line however declined 6% from $6.42 reported in the year-ago quarter.

For the second quarter of 2022, Northrop Grumman reported total sales of $8.80 billion, which missed the Zacks Consensus Estimate of $9.12 billion by 3.5%. Sales also decreased 4% from the year-ago quarter’s $9.15 billion.

The company still expects to generate revenues in the range of approximately $36.2-36.6 billion for 2022. The Zacks Consensus Estimate of $36.59 billion lies near the higher end of the company’s guided range.

Adjusted earnings are still projected in the range of $24.50-$25.10 per share. The Zacks Consensus Estimate of $24.80 per share is in line with the mid-point of the guided range. Shares gained about 2% post reporting earnings on Jul 28.

ETFs in Focus

The U.S. Aerospace and Defense ETFs with notable exposure to most of the above-mentioned companies can be tracked to see the impact of the earnings releases:

iShares U.S. Aerospace & Defense ETF ITA – Up 1.8% Past Week (as of Jul 28, 2022)

SPDR S&P Aerospace & Defense ETF XAR – Up 2.8% Past Week

Invesco Aerospace & Defense ETF PPA– Up 1.5% Past Week

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The Boeing Company (BA) : Free Stock Analysis Report
 
Lockheed Martin Corporation (LMT) : Free Stock Analysis Report
 
Northrop Grumman Corporation (NOC) : Free Stock Analysis Report
 
General Electric Company (GE) : Free Stock Analysis Report
 
General Dynamics Corporation (GD) : Free Stock Analysis Report
 
iShares U.S. Aerospace & Defense ETF (ITA): ETF Research Reports
 
Invesco Aerospace & Defense ETF (PPA): ETF Research Reports
 
SPDR S&P Aerospace & Defense ETF (XAR): ETF Research Reports
 
Raytheon Technologies Corporation (RTX) : Free Stock Analysis Report
 
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