Aerospace/Defense Earnings Spotlight On Karman Stock; AI Stocks Argan, Legence Set To Report

2026-03-21 15:08:13

Two stocks in IBD’s aerospace and defense group — Karman Space & Defense (KRMN) and AAR Corp. (AIR) — are on the latest earnings calendar, along with recent IPO Public Policy Holding (PPHC). Karman stock gapped down to its 50-day moving average during Thursday’s market sell-off, but reversed impressively higher by the close.

Public Policy is a public relations firm, providing lobbying and communications services through a portfolio of 12 member firms. It was an inauspicious debut for the company on Jan. 28 when it priced at 12.25 and closed at 11.28 on its first day of trading. But on March 11, it soared out of an IPO base with a 13 buy point.

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It’s a small company with a market capitalization below $400 million. But the PR firm is expected to earn 43 cents a share when it reports fourth-quarter results Monday after the close. In the year-ago quarter, it lost 23 cents. Analysts polled by FactSet expect revenue of $49.9 million, up 28% from the year-ago quarter.

Karman Stock In Growth Mode

Karman is a leading supplier to the U.S. drone, missile and space industries. Earlier this year, it expanded into the maritime defense market with its $200 million acquisition of Seemann Composites and Materials Sciences. Seemann’s advanced materials are found in submarines, as well as subsea and surface propulsion systems and missile launch products.

Karman has reported two quarters in a row of triple-digit earnings growth. Analysts expect another quarter of triple-digit growth when the company reports results Wednesday after the close. FactSet sees adjusted profit soaring 392% to 12 cents a share. Revenue growth is expected to accelerate for the fourth straight quarter, rising 45% to $121.8 million.

When Karman reported third-quarter results on Nov. 6, shares slumped nearly 6% after the company missed on earnings. But Karman stock closed well off session lows, helped by a 42% jump in revenue to $121.8 million.

Meanwhile, AAR Corp. carries out aviation maintenance services for commercial and government customers. Like Karman, it’s another top-rated stock in the aerospace and defense group, with a Composite Rating of 98. The rating is helped by a steady track record of growth in quarterly earnings and revenue.

The stock cleared a 14-week consolidation on Jan. 5, one day ahead of its Jan. 6 earnings report. That’s when the company reported fiscal second-quarter results for the November-ended quarter that accelerated from the first quarter. Adjusted earnings climbed 31%, while revenue increased 16% to $795.3 million.

AAR’s results are due late Tuesday. Wall Street expects a 17% rise in profit to $1.15 a share on a 16% hike in revenue to $812.6 million.

Watching Argan, Legence

FedEx (FDX) and Planet Labs (PL) were strong earnings movers early Friday. And Wall Street could get similarly strong results in the coming week from Argan (AGX) and Legence (LGN), two strong price performers in IBD’s database with Relative Strength Ratings in the 90s.

In the top-rated Building-Heavy Construction group, Argan is still trading near highs with results due late Thursday. The company is known for its large-scale power generation facilities, including power plants that serve as key infrastructure for data centers.

While it looks like growth has slowed dramatically in recent quarters at Argan, it’s mostly due to tough year-ago comparisons when Argan’s book was arguably its strongest. For its January-ended quarter, analysts are looking for adjusted earnings of $1.98 a share, down 11% year over year, and a 2% decline in revenue to $255.2 million.

After gapping over the 400 level on Feb. 11, Argan’s gain from the 399.30 entry just hit 20%, triggering a profit-taking rule.

New issue Legence reports early Friday. Backed by Blackstone (BX), Legence is yet another AI infrastructure stock as a builder of energy-efficient systems for data centers, including cooling systems.

Legence priced at 28 in September, near the high of a proposed range of 25-28. It debuted on Sept. 12 and closed at 30.50 on its first day of trading. Legence cleared a classic IPO base in mid-October and has showed great relative strength ever since.

Analysts expect the artificial intelligence play to swing to a profit of 5 cents a share from its year-ago loss of 18 cents a share. Revenue should be up 13% to $619.3 million.

Options Trading Strategy

A basic options trading strategy around earnings — using call options — allows investors to buy a stock at a predetermined price without taking a lot of risk. Investors put this to work during stock market uptrends. Traders should generally avoid this during stock market corrections.

Here’s how the option trading strategy works:

See Which Stocks Are In The Leaderboard Model Portfolio

First, investors should identify top-rated stocks with a bullish chart. Some might be setting up in sound early-stage bases. Others might have broken out already and are getting support at their 10-week moving average for the first time. A few also might be trading tightly near highs and are refusing to give up much ground. Avoid extended stocks that are too far past proper entry points.

A call option equates to a bullish bet on a stock. Put options are bearish bets. Further, one call option contract gives the holder the right to buy 100 shares of a stock at a specified level, known as the strike price.

The Next Step

Once you’ve identified a bullish setup in the earnings calendar, check strike prices with your online trading platform or at Cboe.com. Also, make sure the option remains liquid with a relatively tight spread between the bid and ask.

Investors should look for a strike price just above the underlying stock price — that’s out of the money — and check the premium. Ideally, the premium should not exceed 4% of the underlying stock price at the time. In some cases, an in-the-money strike price is OK as long as the premium isn’t too expensive.

It’s best to choose an expiration date that fits a risk objective. But investors should be mindful that time is money in the options market. Near-term expiration dates will have cheaper premiums than those further out.

Buying time in the options market comes at a higher cost. Also, keep in mind that implied volatility tends to rise before an earnings report. That can push up the cost of options.

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Karman Stock Option Trade

When Karman stock traded around 103, a slightly out-of-the-money monthly call option with a 105 strike price and an April 17 expiration came with a premium of around $8.50 a share. That was 8.2% of the underlying stock price at the time, well above the 4% risk threshold.

One contract gave the holder the right to buy 100 shares of Karman stock at 105 apiece. The maximum loss on a 100-share contract comes in at $850. Remember also that Karman would need to rise to 113.50 for the trade to break even, factoring in the premium paid.

The expected earnings-related move in the options market for Karman stock is about 20 points up or down. Further, traders can find this number by adding the call and put premiums for the at-the-money strike of 100, expiring April 17.

Follow Ken Shreve on X/Twitter @IBD_KShreve for more stock market analysis and insight.

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