Key insights
- RBC Capital Markets anticipates strong Q1 performance for aerospace aftermarket and defense segments. They favor Northrop Grumman (NOC) due to improved B-21 bomber outlook and Raytheon Technologies (RTX) for its Raytheon business. Upward revisions are expected for NOC's Aeronautics and Defense Systems growth, and RTX is likely to raise full-year guidance. This suggests a moderately bullish outlook for these specific stocks and potentially the broader aerospace and defense sector.
Investing.com -- Aerospace and defense companies are set to begin reporting first-quarter results on April 21, with analysts at RBC Capital Markets expecting strong performance in aerospace aftermarket and defense segments, though mixed results are anticipated for aerospace original equipment (OE) manufacturers.
Higher fuel prices and supply chain uncertainty may limit upward revisions for aerospace stocks, while defense stocks face concerns about contract award timing and production increases, according to RBC Capital Markets.
Northrop Grumman
RBC Capital Markets highlights NOC as positioned to benefit from improved B-21 bomber outlook and funding.
The firm raised its organic growth estimate for Aeronautics to 6% from 2% and Defense Systems to 6% from 3%, with adjusted earnings per share now estimated at $6.01 for the quarter, up from $5.87 previously.
Analysts believe NOC could increase its full-year 2026 guidance with a strong first-quarter report. Key focus areas include the planned B-21 investment ramp, recent momentum behind Sentinel and CCA programs, and increased munitions outlook given ongoing conflict in Iran.
The firm notes that consensus estimates already sit at or above the high end of company guidance ranges.
Northrop Grumman reported first-quarter 2026 results that surpassed analyst forecasts, with revenue of $9.88 billion and earnings per share of $6.14. Following the report, TD Cowen lowered its price target on the company’s shares but maintained a Hold rating.
Raytheon Technologies
RBC Capital Markets likes RTX for its Raytheon business heading into first-quarter results. The firm raised organic growth estimates at Collins to 9% from 8% and at Pratt & Whitney to 7.5% from 5.3%, driven by anticipated aftermarket strength.
With consensus revenue of $93.5 billion ahead of company guidance of $92 billion to $93 billion, analysts believe RTX will raise full-year 2026 guidance. RBC maintains an Outperform rating with a $230 price target based on a 28 times multiple applied to its 2028 free cash flow estimate of $11.2 billion.
In a recent development, RTX Corporation announced strong first-quarter 2026 financial results, beating both revenue and earnings forecasts with an adjusted EPS of $1.78.
The company’s Pratt & Whitney business also revealed investments of over $100 million to expand engine production capacity in Poland and another $100 million for its U.S. maintenance facilities.
Safran
RBC Capital Markets maintains an Outperform rating with a €400 price target on Safran. The firm raised its first-quarter aerospace propulsion services growth estimate to 21%, driven by stronger-than-expected spare parts growth of approximately 23%.
Analysts believe upside will primarily come from continued strength in the legacy engine aftermarket, supported by engine maintenance, repair and overhaul strength.
The firm suggests Safran could be benefitting from spare parts pre-buying by customers given continued supply constraints and fears of parts availability disruptions.
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