Defense stocks experienced a surge in premarket trade on Wednesday following General Dynamics’ above-forecast third-quarter results. RTX stock also spiked after reporting strong Q3 earnings. The upcoming earnings report from defense peer Northrop Grumman on Thursday has further increased interest in defense companies amidst the rapidly evolving circumstances in Israel and Palestine. RTX stock has seen a significant increase of more than 12% since the start of the conflict, while General Dynamics shares have jumped 6% and Northrop Grumman stock has rallied 13%.
General Dynamics is involved in the production of various defense-related products including F-16 fighter jets, wheeled combat vehicles, command and control systems, submarines, and business jets. The Reston, Va.-based company reported a slight decrease in earnings but a 6% increase in revenue for the quarter. Incoming orders during the quarter were strong, particularly in marine systems and aerospace, resulting in the highest backlog in the company’s history at $95.6 billion. General Dynamics also reached a tentative deal with striking United Auto Workers members, which includes a wage increase and other benefits. The agreement is yet to be ratified by workers.
RTX reported adjusted earnings growth and sales growth in Q3, beating analyst expectations. The company’s backlog for the quarter totaled $190 billion, including commercial and defense orders. RTX also announced plans to sell its cybersecurity, intelligence, and services business for $1.3 billion. The company narrowed its adjusted earnings outlook for the year and expects an improvement in free cash flow. However, RTX stock has faced challenges due to a manufacturing defect in its Pratt & Whitney unit, which has impacted its financials and resulted in a recall that could cost up to $7 billion.
Northrop Grumman specializes in advanced missiles, defense systems, and sensor technology. Analysts expect a slight decrease in earnings but an increase in revenue for the company’s upcoming report. RBC Capital has increased its price target on NOC stock and expects a favorable reporting season for defense stocks. UBS has also initiated coverage of NOC stock with a buy rating and expects overperformance due to its long-term growth programs.
Overall, defense stocks have shown resilience despite challenges, and the upcoming earnings reports are anticipated to provide further insights into the performance of these companies.
