Market News

Mixed Bag of Q4 Results for Defense Stocks LMT and RTX

Defense and aerospace majors Raytheon Technologies Corp. (NYSE: RTX) and Lockheed Martin Corp. (NYSE: LMT) announced their Q4 results on Tuesday. Overall, analysts were expecting defense companies to report higher sales as the United States has hiked its defense spending as it steps up to aid Ukraine in its war with Russia.

However, companies like LMT’s FY23 outlook have been hit by higher costs and persisting supply chain bottlenecks which are squeezing margins.

In contrast, RTX reported better defense sales in Q4 boosted by the higher defense budgets. Let us take a more detailed look at the Q4 earnings of these companies.

LMT Delivers Better-than-Expected Q4 Results

Lockheed Martin reported adjusted earnings for the fourth quarter of $7.79 per share which handily beat analysts’ consensus estimate of $7.41 per share. Sales increased by 7.3% year-over-year to around $19.0 billion in Q4, surpassing Street expectations by $740 million.

Looking forward, management now expects revenue and adjusted earnings per share for FY23 to be in the ranges of $65 billion to $66 billion and between $26.60 and $26.90, respectively. For reference, analysts are expecting $65.75 in revenue along with adjusted earnings of $26.83 per share.

Overall, Wall Street analysts are sidelined about LMT stock with a Hold consensus rating based on one Buy, seven Holds, and one Sell. The consensus price target on Lockheed Martin is $514.88 implying an upside potential of 16.7% at current levels.

Raytheon Reports Mixed Q4 Results

Raytheon reported revenues of $18.1 billion in Q4, up 6% year-over-year but still missing Street estimates by $70 million. Sales were on an upward trajectory as rising travel demand across the globe led to higher demand for jet engines and aerospace services and parts.

The company’s missiles and defense unit posted Q4 sales of $4.1 billion, an increase of 6.2% year-over-year.

Adjusted earnings came in at $1.27 per share, up 18% year-over-year and beating Street expectations of $1.24.

When it comes to its outlook for FY23, RTX anticipates sales to range between $72 billion and $73 billion versus a consensus of $72.46 billion while adjusted earnings are projected to range from $4.90 to $5.05 per share. Analysts are expecting FY23 adjusted EPS at the higher end at $5.05.

The company also announced a business transformation initiative and this year, plans to “align our market-leading franchises with customer needs to drive operational agility and excellence.”

As a part of this initiative, RTX’s “three focused business segments will be Collins Aerospace, Pratt & Whitney, and Raytheon.” This reorganization is expected to be implemented in the second half of this year and Christopher Calio, who will be the President and COO of Raytheon Technologies, effective March 1, will oversee this initiative.

Overall, analysts are cautiously optimistic about RTX stock with a Moderate Buy consensus rating based on nine Buys and five Holds.

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