Sell Alert: 3 Aerospace and Defense Stocks to Dump ASAP
The aerospace and defense industry is one investors should pay attention to and possibly invest in to diversify their portfolios. Defense companies tend not to follow market volatility as much as other industries. This is an advantage in a market downturn. These companies tend to not be hit so hard compared to the overall market. But, the disadvantage is that these defense companies offer results in bull markets that may not correspond to the overall market returns. Therefore, even though most major indices are trending upward there are some aerospace and defense stocks to dump out there.
I will discuss three aerospace and defense companies that have had a rocky present and potentially tricky future due to a number of reasons, from profitable issues to employee strikes and investors’ hesitancy.
Spirit AeroSystems (SPR)
Spirit AeroSystems (NYSE:SPR) manufactures, engineers and builds aerostructures for customers worldwide. More specifically, fuselages and integrated wing components.
On June 22, Spirit AeroSystems employees, represented by the International Association of Machinists and Aerospace Workers, rejected Spirits’ initial four-year contract and voted to begin a strike, suspending factory operations. A week later, the company came to an agreement with the union through the ratification of a new four-year contract. On July 5, they fully resumed operations.
When SPR reported their Q2 2023 earnings, total revenue grew by 8%, but net loss expanded by 69% to $209 million. Following this news, the company’s stock fell 27%, mainly due to profitability concerns in the future regarding the company ceasing operations for a week while the union was on strike.
Terrain Orbital (LLAP)
Terrain Orbital (NYSE:LLAP) provides end-to-end solutions for small satellites for the defense and aerospace industries. So far, the company has over 200 satellites that have been successfully launched.
They released their Q1 2023 earnings results back in May, which reported revenue growth that more than doubled and shrinking net loss compared to the previous year.
On May 25, Terrain Orbital announced the direct offering of 29 million shares valued at around $37.1 million. The proceeds from the direct offering are expected to go towards research and development as well as administrative expenses.
The company’s share price has fallen by 68% over this last year, even though they reported decent earnings results and have broke new ground regarding a new facility and various collaborations. Terrain Orbital is expected to report second quarter earnings on August 15. It will be interesting to see how investors will react to that news.
L3Harris Technologies (LHX)
L3Harris Technologies (NYSE:LHX) is a defense company that provides governmental agencies with mission-critical systems such as cybersecurity, avionics, munitions, autonomous systems, electronic warfare and missile defense.
Over the past year, the share price for L3Harris Technologies has fallen by 23%. In their Q2 2023 earnings release, the company showed a 13% rise in total revenue, but also a 24% decline in EPS. L3Harris also slightly rose their revenue expectations for 2023 due to strong demand, especially in the space sector.
On July 28, L3Harris announced that they acquired Aerojet Rocketdyne, which is a developer of aerospace and defense products. LHX stated that this move helps to diversify the companies portfolio. On August 1, the company announced that it would upgrade the city communications network for first responders and other city employees in Milwaukee, Wisconsin to help improve public safety. Despite these seemingly positive developments the companies stock continues to trend downward. Year-to-date LHX stock is down over 10%.
On the date of publication, Noah Bolton did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.