Aerospace Sector Companies Record Strong Q3 ResultsMatthew Greenwood
posted on November 12, 2018 |
The aerospace industry continues to have a banner year thanks to strong demand from both civilian and military clients. Deloitte anticipated that the global aerospace and defense industry would grow by 4.1 percent, almost doubling 2017’s 2.1 percent growth. So far, the major industry players are doing their best to meet those expectations.
The defense sector—and defense contracts—are growing after steadily contracting every year between 2009 and 2017. On the commercial side, passenger travel demand has increased throughout the year, particularly in Asia and the Middle East. And a renewed space race is also bringing investment, technological advances, and lucrative contracts.
The big aerospace companies continue to rake in profits despite global pressures. “The aerospace and defense industry is grappling with disruptive forces—from market developments (aggressive production ramp-up rates) to technology innovations (autonomous aircraft) to geopolitical upheaval (Brexit),” says a report by Accenture.
Airbus had a strong showing this quarter thanks to demand for its A350 XWB commercial jet. The company earned €40 billion in revenues, or about USD$45.3 billion so far this year.
Boeing’s shareholders were delighted with “blowout” results—$25.1 billion in revenue—and raised its 2018 earnings forecast. Investors seem to be confident in Boeing’s plan to address the backlog in its 737 deliveries.
Lockheed Martin drew in net sales of $14.3 billion in Q3, exceeding Wall Street’s expectations. Like Boeing, it also raised its forecast for earnings in 2018. Investors see the company as a stable option: given its focus on defense spending, the company is less vulnerable to the highs and lows of the economic cycle.
Northrop Grumman’s Q3 sales increased 23 percent to $8.1 billion—leading the company to raise its outlook as well. This is the first full quarter that includes earnings from its Innovation Systems branch, formerly Orbital ATK, which reported sales of $1.42 billion.
Raytheon’s third quarter revenue was $6.8 billion. The company’s number one client is the U.S. government, which has prioritized increased defense spending.
Embraer is the outlier. Its Q3 activity didn’t impress investors, with revenue of $1.2 billion. There doesn’t seem to be a lot of concern among analysts, though: results were weighed down by a weak commercial aviation segment—but Boeing has agreed to buy 80 percent of that business next year. Profits are strong for the executive jet and defense portfolio, which will remain under Embraer’s control.
Boeing leads a strong aerospace sector.
While the skies continue to be friendly for the aerospace industry, that doesn’t mean there won’t be turbulence. As profits continue to rise, aerospace companies will have to adapt to technological advancement, geopolitical uncertainty and upstart competitors.
Check out how aerospace did last quarter at Aerospace Sector Posts Strong Q2 Results Amid Concerns Over Trade War.