Moog and Rocket Lab lead aerospace Q2 earnings beats as sector outperforms

S&P 500 earnings are expected to increase by +24% from the same period last year in the third quarter, the 8th straight quarter of double-digit earnings growth for the index, according to Zacks Investment Research. Earnings are expected to be above the year-earlier level for 14 of the 16 Zacks sectors, with 5 sectors expected to enjoy double-digit growth: Aerospace up +159.3%, Energy up +111.9%, Tech up +41.9%, Basic Materials up +31.2%, and Transportation up +15.1%. The Conglomerates sector is the only one expected to have lower earnings in Q3 relative to the same period last year, down 35.4%, while Consumer Staples earnings are expected to be flat. Excluding the Energy sector, Q3 earnings growth for the S&P 500 drops to +20% from +24%, and excluding the Tech sector, growth for the rest of the index drops to +14.4%. Nvidia's Q3 earnings are expected to increase +90% year-over-year on +91.2% higher revenues, while Micron's year-over-year earnings and revenue growth rates are expected to be +938% and +348.6%, respectively, and Tech sector earnings growth gets cut by slightly more than half once contributions from Nvidia and Micron are excluded. The Q3 earnings season will get the spotlight when the big banks report on October 13th, but the reporting cycle actually got underway with the September 10th quarterly releases from Oracle and Adobe, followed by homebuilder Lennar as the third S&P 500 member to report such Q3 results, with an additional six index members on deck this week including Costco, AutoZone and Darden. Total Q3 earnings for the three S&P 500 members that have reported results already are up +22.6% from the same period last year on +14.9% higher revenues, with 33.3% beating EPS estimates and 66.7% besting revenue estimates.

TransDigm Group's defense revenues rose approximately 11% year over year in the third quarter of fiscal 2026, with year-to-date defense revenues up 10%, as healthy demand across the U.S. defense aerospace market lifted both original equipment manufacturing and aftermarket businesses. Aftermarket growth ran slightly ahead of OEM growth, reflecting continued demand for replacement parts and services across military aircraft. Defense bookings increased both year over year and sequentially in the quarter and exceeded sales, and management expects defense revenue growth to continue through fiscal 2026, with a strong backlog providing visibility into fiscal 2027. Shares of TransDigm have lost 9.7% over the past six months against a 13.5% decline for the industry, and the stock trades at a forward 12-month price-to-sales ratio of 5.25X versus an industry average of 7.23X. The Zacks Consensus Estimate for TransDigm's 2026 and 2027 earnings has moved higher over the past 60 days, and the stock carries a Zacks Rank #3 (Hold).