With 90% of the Aerospace and Defense majors having reported their Q4 figures (as of Feb 8, 2017), the overall growth picture is quite rosy this season. Encouragingly, in terms of growth, the Aerospace and Defense sector secured the second position with 88.9% beating earnings estimates and 44.4% surpassing the revenue mark.  

Mixed performance on the bourses along with a generous flow of funds from the Pentagon kept the major indices of the Aerospace-Defense sector in the green over the past five trading sessions. Consequently, the S&P 500 Aerospace & Defense (industry) Index inched up 1.2%, while the Dow Jones U.S. Aerospace & Defense Index rose 2.2%.

Among last week’s highlights, defense primes Harris Corp. and Triumph Group Inc. (TGI Quick QuoteTGI - Free Report) reported their quarterly figures. Meanwhile, Lockheed Martin Corp. (LMT Quick QuoteLMT - Free Report) , Raytheon Company and Textron Inc. (TXT Quick QuoteTXT - Free Report) managed to clinch a few notable awards from the Pentagon.

(Read Defense Stock Roundup for Feb 2, 2017 here)

Recap of the Week’s Most Important Stories

1. Harris Corporation reported second-quarter fiscal 2017 earnings (on an adjusted basis for the quarter ended Dec 30, 2016) of $1.42 per share, which beat the Zacks Consensus Estimate by 5 cents. Quarterly earnings declined 4.7% on a year-over-year basis.

Revenues in the second quarter came in at $1.7 billion. The top line missed the Zacks Consensus Estimate of $1.76 billion and declined from the year-ago figure.

The company now expects earnings per share (on an adjusted basis) in fiscal 2017 in the band of $5.40 to $5.60 (old guidance: $5.70 to $5.90). On the other hand, the company projects fiscal 2017 revenues in the range of $5.76–$5.88 billion (old guidance: $7.11 billion to $7.33 billion) (read more: Harris Corp Beats on Q2 Earnings, Misses Revenues).

2. Triumph Group reported adjusted earnings from continuing operations of $1.01 in third-quarter fiscal 2017 (ended Dec 31, 2016), which missed the Zacks Consensus Estimate of $1.24 by 18.6%. Reported earnings also declined 37.6% year over year.

In the reported quarter, net sales were $844.9 million, beating the Zacks Consensus Estimate of $840 million by 0.6%. The top line, however, declined 7.6% year over year.

As of Dec 31, 2016, Triumph’s cash balance was $35.5 million, compared with $21 million as of Mar 31, 2016. For fiscal 2017, the company continues to expect revenues at around $3.5 billion to $3.6 billion and earnings per share in the range of $3.15–$3.45 (read more: Triumph Q3 Earnings Miss, Revenues Beat Estimates).

3. Pentagon’s prime contractor Lockheed Martin secured a contract worth $8.5 billion from the Department of Defense (“DoD”) for the production of 90 F-35 fighters. The contract covers 76 F-35As at $94.6 million per unit after a 7.3% reduction from the ninth batch; 12 F-35Bs at $122.8 million after a 6.7% reduction; and two F-35Cs at $121.8 million after a 7.9% reduction.

Though Lockheed said that the contract is valued at $8.5 billion, the Pentagon's joint program office revealed a cost of $8.2 billion. It was, however, later clarified that the $8.2 billion figure excludes jet engines covered under another contract with Pratt & Whitney, a United Technologies unit (read more: Lockheed Gets DoD Deal for F-35 at Historically Low Prices).

Meanwhile, Lockheed Martin’s business unit Rotary and Mission Systems (RMS) secured a contract from the U.S. Navy for the full-rate production of 36 electronic Consolidated Automated Support Systems (eCASS). Work for this deal is scheduled to be over by Jan 2021.

Valued at $166 million, this contract was awarded by the Naval Air Warfare Center Aircraft Division, Lakehurst, NJ. Per the terms of the contract, Lockheed Martin will offer sustaining logistics and engineering support apart from facilitating the manufacturing procedure (read more: Lockheed Wins $166M Navy Deal for Production of 36 eCASS).

4. Diversified manufacturer Textron’s business unit Bell Helicopter recently clinched a modification contract worth $423.4 million from the U.S. Navy. Per the agreement, Textron will manufacture and deliver 14 AH-1Z aircraft from this model’s latest lot.

Notably, the company will deliver these aircraft to support the Marine Corps’ H-1 upgrade program. Bell’s AH-1Z is one of the world’s most advanced combat helicopters.

United States Marine Corps’ (USMC) H-1 program includes the remanufacture of 280 light/attack helicopters in order to extend their service-life till 2020. The basic agenda was to replace two-bladed rotor systems with four bladed ones like AH-1Z to achieve improved performance, reliability and maintenance (read more: Textron's Bell Helicopter Wins $423.4M Deal for H-1 Program).

Textron’s Bell Helicopter business unit secured another contract worth $49.1 million from the U.S. Navy for the procurement of long-lead items and components for 27 Lot 15 AH-1Z aircraft for the Marine Corps. Work related to this deal is expected to be over by Mar 2018.

Textron will utilize fiscal 2017 aircraft procurement funds (Navy) to finance this deal. Work will be executed in Fort Worth and Amarillo, TX (read more: Textron's Bell Helicopter Wins $49M Navy Deal for AH-1Z Jets).

5. Defense giant Raytheon won a foreign military sales (“FMS”) contract from the U.S. Army to provide engineering services for the PATRIOT weapon systems program. Valued at $202.2 million, the contract was awarded by the Army Contracting Command, Redstone Arsenal, AL.

Per the contract, Raytheon will provide engineering services to Germany, Israel, Japan, Republic of Korea, Saudi Arabia, Kuwait, Netherlands, Qatar, Spain and Taiwan. Work is scheduled to be completed by Jan 31, 2018 and will be carried out across various locations.

PATRIOT is a long-range, high-altitude; all-weather system designed to counter threats from tactical ballistic missiles, cruise missiles and advanced fighter aircraft. The company believes that growing interest in including a 360-degree active electronically scanned array radar to the Patriot Air Defense systems will drive sales (read more: Raytheon Wins $202M Army Deal for PATRIOT Program).

Last Week’s Performance

Majority of the defense biggies put up an impressive show over the past five trading sessions, except General Dynamics Corp. (GD Quick QuoteGD - Free Report) and Rockwell Collins Inc. . In particular, Raytheon gained the most, followed by Northrop Grumman Corp. (NOC Quick QuoteNOC - Free Report) .

However, over the past six months, all the industry majors have delivered a stellar performance. Notably, The Boeing Company gained the maximum at 27.81%, followed by General Dynamics.

The following table shows the price movement of the major defense players over the past five trading days and the last six months.

What’s Next in the Defense Space?

Huntington Ingalls Industries, Inc. (HII Quick QuoteHII - Free Report) is slated to report fourth quarter and full-year 2016 results on Feb 16.

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