Don’t be influenced by widespread concerns that budgetary belt-tightening on Capitol Hill will hit the bottom lines of U.S.-based defense contractors. Every fiscal year, no matter how constrained is the funding picture, the Pentagon almost always gets its way.
This is quite evident from the recent Zacks Earnings Trend. The earnings beat ratio of 77.8% of the aerospace and defense companies that have already unfolded their Q3 earnings results is a stellar 85.7%.
These defense companies were not only up against the ongoing budget austerity but were subject to a tepid economic growth scenario throughout the third quarter of 2015. Growth remained challenged for most of the quarter thanks to a strong dollar and weak energy prices. Moreover, the persistent slowdown in China deepened global economic woes. Cracks began to appear in the economy at a time when the U.S. was reasserting itself as the global growth leader.
In spite of the macro issues, the defense companies held up well this past quarter. They have not only reported better-than-expected results but also lifted their views. Let’s have a look at some of the defense companies that have crushed the Street expectations this Q3 season:
Lockheed Martin Corp. (LMT – Analyst Report)
The Pentagon’s prime contractor – Lockheed Martin ? opened this earnings season with robust third-quarter profits. It reported better-than-expected earnings along with higher revenues, solid margins, and strong cash flows, buoyed by robust sales of its F-35 Joint Strike Fighter. The solid quarterly results have enabled it to lift its 2015 guidance for sales, operating profit, and EPS.
Lockheed Martin continues to be a strong cash generator helping it to take important cash deployment decisions. In the third quarter, it achieved over $1.5 billion in cash from operations compared with $990 million a year ago. Also, during the quarter, the company’s board of directors approved two major moves in the areas of cash deployment.
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