Boeing & Northrop Boost 2016 Outlooks as General Dynamics Posts 3Q Earnings Beat

Three of the world’s largest government contractors listed in both Executive Mosaic’s GovCon Index and the U.S. stock bellwether S&P 500 composite index released third quarter financial results before markets opened Wednesday.

Boeing (NYSE: BA), General Dynamics (NYSE: GD) and Northrop Grumman (NYSE: NOC) all posted earnings per share figures above Wall Street’s expectations and two exceeded analyst forecasts for revenue.

Boeing and Northrop also boosted full-year earnings and revenue guidance in their statements, while General Dynamics was due to update investors on its outlook in a conference call Wednesday morning before financial markets open.

These three members of the U.S. government contracting’s “Big Five” stated their financial results a day after the world’s largest GovCon company Lockheed Martin (NYSE: LMT) lifted its 2016 outlook and issued an initial 2017 forecast of an approximate 7-percent revenue increase.

As of Tuesday’s close, the GovCon Index has climbed 6.43 percent since the start of the year and is up 5.64 percent over 12 months.

By comparison, the S&P 500 has risen 4.85 percent on a year-to-date basis and added 3.28 percent for 52 weeks.

Boeing (Also a Dow Jones Industrial Average stock):

• Earnings per share: $3.51 (with $0.98 from favorable tax items) beats Wall Street estimate of $2.62
• Net income: $2.28 billion, up 34.12 percent from prior year period
• Revenue: $23.9 billion, down 7.55 percent, beats Wall Street estimate of $23.64 billion
• Guidance:
  • Earnings raised to $6.80-$7.00 per share from prior $6.10-$6.30 outlook,
    Wall Street estimate at $6.34
  • Revenue raised to $93.5 billion-$95.5 billion from prior $93 billion-$95 billion outlook,
    Wall Street estimate at $94.01 billion
• Notes:
  • Defense segment down 10.05 percent to $7.51 billion on fewer C-17 deliveries and F-15 volume
  • Defense segment revenue represented 31.41 percent of total third quarter sales,
    down from 32.3 percent in same period last year
  • Defense segment operating margin down to 10.4 percent from 12.2 percent in prior year period,
    includes $162 million charges on delays in the NASA Commercial Crew program
  • Defense segment operating margin exceeds commercial airplane by 1 percent
  • Defense segment revenue full-year outlook held at $28.5 billion-$29.5 billion
• Stock is down 6.20 percent from the year’s start and has declined 4.98 percent over 12 months

General Dynamics:

• Earnings per share: $2.48 beats Wall Street estimate of $2.38
• Net income: $688 million, down 6.14 percent from prior year period
• Revenue: $7.73 billion, down 8.26 percent, misses Wall Street estimate of $7.91 billion
• Guidance:
  • Earnings of $9.70 per share versus Wall Street estimate of $9.73
  • Revenue at $31.6 billion-to-$31.8 billion versus Wall Street estimate of $31.5 billion
• Notes:
  • Information systems and technology segment revenue up 5.4 percent to $2.34 billion
  • Information systems and technology segment revenue represented 30.27 percent of total sales,
    up from 27.75 percent in prior year period
  • Information systems and technology segment operating margin at 10.9 percent,
    up 1 percent from prior year period
  • Total company operating margin at 13.8 percent compared to 12.9 percent in prior year period
• Stock is up 9.33 percent from the year’s start and has risen 3.63 percent over 12 months

Northrop Grumman:

• Earnings: $3.35 per share beats Wall Street estimate of $2.81
• Net income: $602 million, up 16.66 percent from prior year period
• Revenue: $6.15 billion, up 2.84 percent, beats Wall Street estimate of $6.02 billion
• Guidance:
  • Earnings raised to $11.55-$11.75 from prior $10.75-$11.00 outlook,
    Wall Street estimate at $11.05
  • Revenue raised to $23.9-$24.1 billion from prior $23.5 billion-$24 billion outlook,
    Wall Street estimate at $23.84 billion
• Notes:
  • Revenue increase driven by higher volume in F-35, E-2D, Triton and Global Hawk programs
  • Operating margin at 13.4 percent compared to 13.3 percent in prior year period
  • Operating margin forecast lifted to mid-high 12 percent from low 12 percent
  • Third quarter share count down 4 percent year-over-year to 179.6 million shares
• Stock is up 14.33 percent from the year’s start and 22.30 percent over 12 months