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Will Aerospace Unit Drive General Dynamics' (GD) Q3 Earnings?

Zacks Equity Research

General Dynamics Corporation GD is scheduled to release third-quarter 2019 results on Oct 23, before the opening bell.

Segmental strength is likely to have boosted the company’s performance in the to-be-reported quarter.

Let’s take a detailed look at the factors influencing General Dynamics’ upcoming quarterly results.

Aerospace Unit: A Key Catalyst

General Dynamics’ Aerospace segment (the largest segment) revenues are likely to have benefited from increased G500 aircraft deliveries. Moreover, in June, the company received a type and production certification from the U.S. Federal Aviation Administration (FAA) for the G600 aircraft. Following the certification, the company commenced the delivery of this aircraft in August to a U.S. customer. Assuming that a few more such deliveries had taken place subsequently, we expect G600 to have favorably contributed to the Aerospace segment’s revenues in the third quarter.

The Zacks Consensus Estimate for the Aerospace segment’s revenues in the third quarter is pegged at $2,545 million, implying a 25.3% increase from the figure reported in the year-ago quarter. The consensus mark for the segment’s operating income is pegged at $396 million, implying 5.3% growth from the figure reported in the year-ago quarter.

Q3 Backlog to Thrive

General Dynamics has an impressive history of acquiring orders from both Pentagon and its foreign allies, courtesy of the huge demand for its enhanced military shipbuilding capabilities. Notably, during the third quarter, the company was successful in acquiring a contract worth $2 billion to continue managing the U.S. Department of State (DOS) global technical security supply chain and a $1.6-billion deal for the construction of the sixth and seventh ships of the Expeditionary Sea Base (ESB) program. It also secured a series of smaller contracts. These are expected to get reflected in the company's backlog count in the to-be-reported quarterly results.

Solid Prospects for Marine Systems Unit

Increasing demand for submarines and support ships has been significantly driving General Dynamics’s Marine Systems unit’s top line, a trend that most likely continued in the third quarter. In line with this, the Zacks Consensus Estimate for the Marine Systems unit’s revenues is pegged at $2,152 million, implying a 7.4% increase from the year-ago quarter’s reported figure.

Revenue & Earnings Estimates

The Zacks Consensus Estimate for the company’s third-quarter sales is pegged at $9.68 billion, indicating 6.5% growth from the year-ago quarter’s reported figure.

Favorable margin performance with the launch of new aircraft might have driven the company’s bottom line during the quarter. The consensus mark for the company’s third-quarter earnings pegged at $3.06 indicates 5.9% growth from the year-ago quarter’s reported figure.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for General Dynamics this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

General Dynamics has an Earnings ESP of 0.00% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

General Dynamics Corporation Price and EPS Surprise

General Dynamics Corporation Price and EPS Surprise

General Dynamics Corporation price-eps-surprise | General Dynamics Corporation Quote

Stocks to Consider

Here are some defense companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

The Boeing Company BA is scheduled to report third-quarter 2019 results on Oct 23. The company has an Earnings ESP of +6.25% and a Zacks Rank #3.

Leidos Holdings Inc. LDOS is expected to report third-quarter 2019 results on Oct 29. The company has an Earnings ESP of +1.52% and a Zacks Rank #2.

Northrop Grumman Corp. NOC is scheduled to report third-quarter 2019 results on Oct 24. The company has an Earnings ESP of +2.26% and a Zacks Rank #3.

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