U.S. Aerospace and Defense – Holdings
| Company | % | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| BA | BOEING | $526,531,384.92 | 18.73 | 2,541,052.00 | – | ||||||
| RTX | RAYTHEON TECHNOLOGIES CORP | $512,701,873.50 | 18.24 | 7,272,367.00 | – | ||||||
| LMT | LOCKHEED MARTIN CORP | $155,857,103.31 | 5.54 | 451,119.00 | – | ||||||
| TDG | TRANSDIGM GROUP INC | $132,102,195.03 | 4.70 | 216,203.00 | – | ||||||
| LHX | L3HARRIS TECHNOLOGIES INC | $127,676,450.77 | 4.54 | 683,749.00 | – | ||||||
| GD | GENERAL DYNAMICS CORP | $127,488,786.40 | 4.54 | 835,280.00 | – | ||||||
| NOC | NORTHROP GRUMMAN CORP | $126,936,901.56 | 4.52 | 423,886.00 | – | ||||||
| TDY | TELEDYNE TECHNOLOGIES INC | $126,226,352.00 | 4.49 | 326,200.00 | – | ||||||
| TXT | TEXTRON INC | $99,922,315.14 | 3.55 | 2,041,731.00 | – | ||||||
| HWM | HOWMET AEROSPACE INC | $97,927,196.81 | 3.48 | 3,481,237.00 |
“Generous tax breaks in the Cares Act, along with the heavy losses racked up by companies in 2020, may produce a tax shield for years. The higher the tax rate goes, the more companies could save.” – Barrons
The Aerospace and Defense ETF is just below the breakout / buy zone, with the top 10 stocks representing more than 70% of the ETF weighting. Many of the stocks above are either breaking out or reversing from recent lows. LMT, and NOC are examples of the latter.
Analysts are offering fresh 12 month price targets for Boeing (BA), even as the economy recovers. The average analyst price target is $227.00 (+/-) with a high estimate of slightly above $300 (+/-) and a low estimate of $135 (+/-). Earnings season is starting, so all eyes will be on these defense and aerospace stocks. Many companies will pay taxes on the gains, even with rates potentially going up under the new administration.
Boeing
Boeing (BA), has had its share of issues. For starters, the grounding of its 737 MAX jet went on longer than expected and the global collapse in passenger aviation due to the pandemic compunded managements strategic plans. These issues compounded, has analysts expecting pretax losses to exceed $6.o billion in 2020.
Barrons also reported Boeing is expected to deliver $1.5 billion in pretax income this fiscal year and more than $5.0 billion in 2022. Many investors are apparently unaware of the offsets to earnings, which are so large that the company may not pay income taxes until 2024 on 2023 earnings.
Technically speaking, the stock is perched on the 50d moving average. RSI is turning higher along with stochastic. MACD will turn and cross soon if price action recovers over the next few trading days. We’re waiting for a follow through next week before starting a position.
Sales and earnings are beginning to grow again (left panel above), so this earning season will be an early tell for Boeings prospects. One thing is certain, tax losses due to the pandemic will offset any “new adminstration” increases in corporate taxes in the years to come.
Raytheon Technologies
Raytheon (RTX)is trading above the 21d moving average, as MACD starts a bullish cross this week (not shown). Volume was above average signaling institutions are starting to buy shares. We’re looking for another bullish follow through day for confirmation before taking a position. The 50d moving average is rising up to meet price acrion as well.
Earnings season starts in earnest this week, with banks reporting Friday morning and next week. With OPEX also on Friday, many investors and market participants are looking for direction into February.
Join us today in the trading room for our LIVESTREAM broadcast during market hours, as we navigate the current environment. Watch, listen, and trade from 9:20 AM to 4:15 PM Monday through Friday.
Happy Trading,
Vinny
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