By: Carter Copeland

With earnings season now close to done, we highlight a handful of themes that we see as significant marginal drivers of group performance as we exit Q4 results and look to conference season, which begins this week.

The market will pay for defense pension benefits: We’ve highlighted before the impact that sizable pension pre-funding efforts would have on 2019-2020 FCF for several defense companies and before Q4 results, there was a debate around if the market would pay for more pension-related cash reimbursements that will ultimately prove unsustainable in the long-run.  After seeing the defense performance on earnings day this quarter (see figure 1), the debate feels over. While we’re firm believers that there’s no such thing as long-term pension income, the market simply doesn’t care (and is unlikely to any time soon). Can’t fight the momentum.

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