Key Highlights

  • Lockheed Martin (NYSE: LMT) gained 2.6% after beating on earnings and revenue, with sales up 11% to $20.7 billion and a record $292 billion backlog.
  • Honeywell Technologies (NASDAQ: HON) fell 2.1% despite beating on earnings and raising full-year guidance.
  • Honeywell’s revenue of $4.99 billion was marginally below the $5.01 billion consensus.
  • It was Honeywell’s first report as a standalone company after spinning off aerospace.

Lockheed Martin Corp. (NYSE: LMT) gained 2.6% in premarket trading on Thursday after beating on earnings and revenue, while Honeywell Technologies (NASDAQ: HON) fell 2.1% even though it raised its full-year outlook, a split that shows how much the starting point matters in an unforgiving market.

Both companies beat on profit. The difference lay in the quality of the beat, the direction of revenue against estimates and what each said about the road ahead.

Lockheed: A Clean Beat and a Record Backlog

Lockheed reported third-quarter sales up 11% from a year earlier to $20.7 billion and net profit up 14% to $1.8 billion, with earnings of $7.97 a share. The backlog reached a record $292 billion. The company raised its full-year guidance, TradingKey reported. Shares rose as much as about 4.6% earlier in premarket trading.

A backlog of that size gives investors visibility in a period of rising military budgets and escalating conflict in the Middle East. It also helps that defense stocks have been favored in the rotation away from technology: Northrop Grumman Corp. (NYSE: NOC) rose by as much as nearly 4% on Tuesday after beating profit estimates.

Honeywell: A Beat With Caveats

Honeywell reported adjusted earnings of $2.27 a share, up 34% from a year earlier and above consensus estimates of about $2.16 to $2.19. Revenue of $4.99 billion, up 1% on a reported basis and 7% organically, was marginally below the $5.01 billion consensus. Operating margin was 14.8%, up 640 basis points, and segment margin was 21.3%, up 370 basis points.

Honeywell raised its full-year outlook. It now expects sales of $20.0 billion to $20.1 billion, organic growth of 4% to 5%, segment margin of about 20.5% and adjusted earnings of $8.40 to $8.45 a share, against a consensus of about $8.37. The midpoint is only slightly above consensus, and it follows an earlier raise to $8.40 to $8.45 from $8.05 to $8.35.

The report was also Honeywell’s first since completing the spin-off of its aerospace business, Honeywell Aerospace (NASDAQ: HONA), on June 29. It said its fixed-cost reductions allowed adjusted operating income to grow at more than three times the rate of sales.

What Separated the Two

Three things explain the divergence. Revenue was slightly short at Honeywell and a clear beat at Lockheed. Lockheed’s record backlog supports growth, while Honeywell’s guidance was close to what the market already expected. And sentiment toward defense is stronger than toward diversified industrial automation at present. As one analysis put it, investors are looking at guidance and quality rather than the headline beat.

The Backdrop

The wider market was weak. S&P 500 futures fell 0.9% and Nasdaq 100 futures lost 1.6% as oil rose toward $112 a barrel on the Middle East conflict and the AI selloff deepened. The Federal Reserve is expected to hold rates next week, but markets price roughly a 90% chance of a December hike, which raises the bar for industrial companies with exposure to housing and business investment. September housing starts fell 5.2%.

What to Watch

Investors will watch how Honeywell’s fourth-quarter organic growth of 5% to 6% materializes and whether revenue catches up with earnings. For Lockheed, the questions are conversion of the record backlog into sales and the path of defense budgets. The aerospace names that report next, and the performance of defense versus technology in the rotation, will indicate whether this divergence holds.

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