Last week saw the newest quarterly earnings release from General Dynamics Corporation (NYSE:GD), an important milestone in the company's journey to build a stronger business. Revenues came in 5.4% below expectations, at US$8.7b. Statutory earnings per share were relatively better off, with a per-share profit of US$2.43 being roughly in line with analyst estimates. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, General Dynamics' 15 analysts currently expect revenues in 2020 to be US$39.2b, approximately in line with the last 12 months. Statutory earnings per share are expected to shrink 6.0% to US$11.22 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$39.3b and earnings per share (EPS) of US$11.35 in 2020. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
It will come as no surprise then, to learn that the consensus price target is largely unchanged at US$176. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values General Dynamics at US$225 per share, while the most bearish prices it at US$142. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that General Dynamics' revenue growth will slow down substantially, with revenues next year expected to grow 0.8%, compared to a historical growth rate of 5.2% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 2.8% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than General Dynamics.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that General Dynamics' revenues are expected to perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for General Dynamics going out to 2024, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 2 warning signs for General Dynamics (1 makes us a bit uncomfortable) you should be aware of.
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