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RTX and Lockheed Earnings: Can Strong Guidance Reset the Defense Trade?

Written by Dan Schmidt

The war trade has resumed in July, and earnings from two of the U.S.’s most prominent defense contractors are leading the tape. After weak Q1 reports and a tenuous Iran ceasefire, aerospace and defense stocks deepened their drawdowns as the market repriced the re-stock trade and institutional selling intensified. But now that the war is back on and Q2 reports from defense companies are rolling in, the repricing is being repriced. Does the defense trade have staying power this time?

What RTX and Lockheed Martin Earnings Tell Us About the Defense Trade’s Path Forward

Lockheed Martin Inc. (NYSE: LMT)and RTX Inc. (NYSE: RTX) are two of the largest U.S. defense contractors, and both their stocks soared at the start of the year. But the outbreak of the Iran war in late February actually marked the top of the defense trade, and shares of both companies declined 25% and 19% peak to trough, respectively, after making all-time highs in Q1. Poor Q1 earnings from Lockheed drove the deeper decline, while higher commodity prices also weighed on RTX’s commercial order book.

The Q2 reports flipped the script, with both companies beating earnings-per-share (EPS) and revenue estimates and adding to their record backlogs. And crucially, not a dollar of earnings or backlog space has factored in the resumption of hostilities in Iran.

One crucial caveat to the thesis: the 2027 National Defense Authorization Act (NDAA) has not yet been enacted following a failed cloture vote in the Senate. The debate is likely just noise and posturing between the Trump administration and Congress. Still, if the NDAA isn’t signed by October 1, no multiyear contracts for defense procurement can be distributed, and these contracts are the backbone of the RTX and LMT backlogs.

RTX: Clean Earnings Beat Has Stock Primed for New Highs

The drawdown in RTX shares is officially over following its Q2 2026 results. The beat was highlighted by 14.5% year-over-year (YOY) revenue growth, which topped analysts’ estimates by more than 8%. EPS of $1.89 also crushed the expected $1.66, and the backlog grew 22% YOY to a record $289 billion.

More than $43 billion worth of new orders were booked in the quarter, including $20 billion for the Raytheon division (i.e., defense). This is the company’s 8th consecutive beat, which may be why investors are willing to pay 30 times forward earnings for the stock.

An 8% earnings beat is rare, even for RtX, and it gave management the confidence to raise guidance for full-year sales, EPS, and free cash flow. The company now projects total 2026 EPS of $7.10 to $7.25, a 5% increase over its previous high-end estimate.

RTX shares jumped 7% on the release, but a looming issue clouds the celebration. The backlog is a mix of commercial and defense contracts, and the Collins Aerospace and Pratt & Whitney divisions account for $170 billion of the $289 billion total. Collins and Pratt are the aerospace wings of the company, with Raytheon making the weaponry, which means more than 58% of the total backlog is exposed to commodity risk through higher fuel prices and lower airline capacity—two factors exacerbated by the Iran war.

RTX shares are just a hair below their previous all-time high following the 7% earnings pop, and the technical signals are pointing toward more short-term gains. The stock now trades comfortably above the 50-day and 200-day moving averages, which are converging into a Golden Cross. The MACD indicator has also reached positive territory above the histogram, and a bullish cross hints at more upside to come.

Lockheed Martin: Headline Numbers Mislead, But Backlog Stronger Than Ever

On first glance, Lockheed Martin blew the market away in Q2 2026, beating top and bottom line estimates with EPS of $7.94 on $1.8 billion in net income.

This represents more than 400% YOY earnings growth, but that figure is flattered by the $1.6 billion losses absorbed by Lockheed in Q2 2025, which depressed the year-ago base. Still, the stock popped 10% on the day for a reason.

First, the backlog continues to reach record levels, growing to $230 billion, up from $193 billion at the end of 2025. The Q2 haul was especially impressive as Lockheed booked $65 billion in new orders in the period. Missiles and Fire Control (MFC) remains the shining segment, with a backlog of $87 billion for THAAD interceptors, GMLRS, HIMARS, and radar systems.

Additionally, Lockheed’s cash pile shows very real gains over the previous year’s quarter. Operating cash flow was $3.2 billion, and quarterly free cash flow came in at $2.25 billion. Management also boosted the top end of full-year revenue guidance to $81.75 billion, up from $80 billion in the previous quarter.

LMT shares had a deeper drawdown this spring, falling from an all-time high of $676 on March 2 to $491 by the end of June. The stock declined more steeply than RTX due to its poor Q1 earnings, but it may also have more upside given its unique exposure to the war in Iran. The company’s backlog is nearly all defense, meaning limited commodity risk compared to RTX.

The chart also shows a violent reversal, with the 10% pop breaking through both the 50-day and 200-day moving averages. The Relative Strength Index (RSI) has also moved above 50 into bullish territory, but the stock is still about 16% below the March all-time high. At 19 times forward earnings, LMT is cheaper than RTX, but its backlog is less diversified, and another sudden ceasefire would pressure Lockheed’s Q3 guidance. READ THIS STORY ONLINE

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These 4 Earnings Reports Expose the Market’s Growing Economic Divide

Written by Jessica Mitacek

As the second week of earnings seasondraws to a close, companies across several sectors are providing clues about what investors can expect for the remainder of the year. Of course, quarterly earnings and revenues are rear-facing metrics. But when combined with recent financial performances and full-year guidance, notable trends begin to emerge.

Four companies—ranging from defense contractors to homebuilders to big banks—that reported earnings on Tuesday, July 21, are providing a glimpse into what the market may hold in the second half of 2026.

Northrop Grumman’s Record Backlog Reinforces the Defense Spending Story

The energy sector hasn’t been the only beneficiary of the war with Iran.

The ongoing war with Iran has also kept defense spending in focus, and the administration’s 2027 budget request proposes $1.5 trillion in total defense resources, although Congress has not enacted that amount.

Northrop Grumman’s (NYSE: NOC)Q2 earnings double beat offered further evidence of strong global demand for defense systems. Earnings per share (EPS) of $7.68 topped the analyst consensus of $6.82, while quarterly revenue of $10.88 billion—a 5.1% year-over-year (YOY) increase—surpassed expectations of $10.8 billion.

But the biggest takeaway was that, with no end in sight for the war in Iran, Q2 serves as a precursor to what is likely to be a protracted global conflict. Northrop announced that it received net awards totaling $20 billion during the quarter, pushing its backlog to a record $104.7 billion.

As a result, the company raised its 2026 sales guidance to $43.75 billion to $44.25 billion, with full-year adjusted EPS guidance of $28.60 to $29.10.

Defense contractors have been pivotal in industrials’ outperformance this year. The sector ranks third with a year-to-date (YTD) gain of 15.18%, trailing only tech at 25.57% and energy at 30.84%. With institutional buying nearly doubling selling over the past 12 months, and a short interest of just 1.66% of the float, Northrop should continue to reward shareholders for the remainder of the year.

D.R. Horton Treads Water as Housing Stagnates, Cancellations Rise

With real estate stuck in limbo, homebuilder stocks have chopped around this year.

D.R. Horton (NYSE: DHI) is the perfect example. Shares were up approximately 3.7% year to date (YTD) ahead of its fiscal Q3 earnings release.

But now, the stock currently finds itself in one of those downtrends,

After enduring six double-digit peaks or troughs, DHI is down a little over 3% YTD, and down nearly 15% from its three-month high. Much of that can be attributed to a stagnant—if not cooling—housing market. 

According to the latest House Market Index (HMI) survey, homebuilders cut prices by 37% in July, 35% in June, and 32% in May. That’s a bearish trend for housing, and the largest companies may be hanging their hopes on a potential interest rate cut from the Federal Reserve later this year.

For D.R. Horton, that showed up in the company’s latest earnings report. EPS of $3.20 beat analyst expectations of $3.02. And while revenue of $9.23 billion beat expectations of $9.1 billion, the figure was essentially flat YOY—a concerning indicator for the housing market.

Management noted that affordability constraints and cautious consumer sentiment continue to weigh on demand, with orders flat YOY and the company’s cancellation rate rising to 20% from 17% a year ago.

D.R. Horton cut its full-year delivery outlook after demand softened later in the quarter, and now expects Q4 starts to be lower than Q3 while keeping gross margin roughly flat sequentially. That leaves investors with a mixed picture: The builder is still beating near-term expectations, but demand, pricing incentives, and margins remain under pressure.

Capital One and Schwab Point to Improving Financial Momentum

This year, the financials have performed third-worst among the S&P 500’s 11 sectors. But a string of earnings beats from major banks has improved the sector’s near-term momentum. The sector appears to have turned a corner, posting the third-best performance with a 7.28% gain.

Capital One (NYSE: COF) and Charles Schwab (NYSE: SCHW) both posted a double beat in their Q2 earnings reports.

Last year, Capital One doubled downon its efforts to challenge the duopoly of Visa (NYSE: V) and Mastercard (NYSE: MA) by expanding its in-house payment rails.

Capital One completed its acquisition of Discover in May 2025, and Discover says card accounts will migrate to Capital One throughout 2026 and early 2027, with a major wave scheduled to begin July 27, 2026.

On the earnings conference call, CEO Richard Fairbank said that 50% of Discover’s new-account originations were already on Capital One’s technology platform and that the company expected all new Discover originations to be on its technology stack by the end of Q3.

The bank handily beat on earnings with EPS of $5.81 against analyst expectations of $4.79. However, the upshot was revenue, which rose 26.9% YOY to $15.83 billion, surpassing the consensus forecast of $15.76 billion.

Meanwhile, Schwab posted record EPSand record quarterly revenue of $1.62 and $7.07 billion, respectively. Revenue increased 20.9% YOY, and management highlighted strong operating leverage and a 54.3% adjusted pre-tax profit margin.

Trading activity and lending were major drivers of the quarter, with daily average trades reaching 11.9 million and bank loan balances rising to $67 billion, up 33% YOY.

Looking forward, the company emphasized numerous longer-term growth initiatives, including crypto transfers, private markets, AI tools, tokenization infrastructure, and prediction markets tied to financial events.

While these could expand the platform over time, they are in their early stages and therefore unlikely to materially affect 2026 results.

For investors, the common thread is improving operating momentum. Both stocks may merit watchlist attention if earnings growth continues without a corresponding rise in credit or execution risk. READ THIS STORY ONLINE

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Broadcom May Be the Biggest Winner From Alphabet’s Earnings

Written by Leo Miller

Magnificent Seven giant Alphabet (NASDAQ: GOOG) just reported its latest financial results, but the company’s earnings have implications for more than Alphabet itself.

Broadcom (NASDAQ: AVGO) has some of the clearest ties to Alphabet, having helped the firm develop its tensor processing units (TPUs) for years. Amid this, Alphabet is widely considered to be Broadcom’s largest AI chip customer.

In turn, what Alphabet is seeing from a demand perspective and the spending it forecasts has meaningful consequences for Broadcom. While Alphabet shares tumbled after releasing its results, it’s hard not to take the company’s numbers as positive indicators for the world’s second-largest semiconductor company.

Alphabet’s Capital Expenditures Soar, Guidance Gets a Boost

The first notable metric to highlight is Alphabet’s capital expenditure (CapEx) and its CapEx forecasts. Alphabet’s CapEx in Q2 was $44.9 billion. This equated to an increase of 100% year-over-year (YOY) and a 26% increase quarter-over-quarter. The company notes that the vast majority of this spending went toward infrastructure to support its AI investments.

Alphabet’s rapidly increasing AI infrastructure spending is a strong positive indicator for Broadcom. Much of that increased spending goes toward the TPUs Broadcom helps develop, as well as its networking chips.

More importantly, Alphabet also raised its full-year CapEx guidance. Its CapEx forecast now sits at $195 billion to $205 billion. At a midpoint of $200 billion, this is approximately 8% higher than the company’s previous midpoint CapEx guidance of $185 billion. This increase raises the ceiling of revenue that Broadcom could generate in 2026.

Additionally, Alphabet is now near the top of the heap in planned hyperscaler CapEx for 2026. Amazon.com (NASDAQ: AMZN) expects to spend $200 billion, Microsoft’s (NASDAQ: MSFT) planned CapEx is $190 billion, and Meta Platforms’ (NASDAQ: META) is $135 billion at the midpoint. For Broadcom, having a close-knit partnership with the company tied for the highest CapEx guidance among hyperscalers is a great position to be in.

Alphabet Looks to Accelerate AI Capacity Delivery, Makes No Mention of Memory

It is also important to note the reasoning behind Alphabet’s CapEx increase. The company says the increase is “primarily due to an acceleration in the delivery of capacity to meet growing demand.” “Acceleration in delivery” is the key phrase, showing that Alphabet wants more AI infrastructure, like Broadcom’s products, faster. This signals Broadcom’s revenue growth attributable to Alphabet could accelerate.

This reasoning is notably different from past statements made by other hyperscalers when raising CapEx guidance. For example, in Q1, Meta raised its CapEx guidance, but said, “Most of that is due to higher component costs, particularly memory pricing.”

Here, Meta indicates that much of the gain from its higher CapEx guidance will flow to memory makers, rather than companies like Broadcom. Thus, the omission of such language by Alphabet and its focus on demand instead is considerably more positive for Broadcom.

Cloud Takes off, Supporting TPU Demand

Speaking of demand, Alphabet’s Cloud business is soaring. Cloud revenues grew by 82% YOY, well more than double the 32% YOY growth rate achieved in Q2 2025. Cloud was far and away Alphabet’s fastest-growing segment. Search was second, growing by just 17% YOY. Overall, Cloud grew more than three times faster than Alphabet’s total revenue growth rate of 24% YOY.

This is key for Broadcom, as Cloud is the segment that is directly tied to TPU demand. Accelerating Cloud demand implies that downstream demand for Broadcom could also be accelerating. Additionally, Alphabet said that it received its first revenue from its external TPU sales. Historically, Alphabet has used the vast majority of its TPU capacity for internal purposes, such as training and deploying its Gemini models.

As the company begins to sell TPUs to third parties, it could be a substantial growth driver for Broadcom as well. Although Alphabet expects to recognize the vast majority of external TPU revenues in 2027, it is good to see that this business is starting to ramp up.

Alphabet notes that its models are processing 22 billion tokens per minute, more than double the 10 billionachieved in Q4 2025. Tokens per minute is a key indicator of AI demand, showing how much information models take in and output. As TPUs are part of the underlying hardware that processes tokens, more token demand should generally translate into more TPU demand.

Alphabet Growth and CapEx Guidance: Another Feather in Broadcom’s Cap

Overall, Alphabet is seeing a huge increase in demand in its Cloud segment. This results in the company needing more AI infrastructure and the notable CapEx guidance boost it outlined. As Alphabet’s key custom chip partner, the implications for Broadcom are clearly positive, supporting the firm’s already strong AI growth outlook. READ THIS STORY ONLINE

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Further Reading: ALERT: Drop these 5 stocks before the market opens tomorrow!(From Weiss Ratings)