Last week, you might have seen that General Dynamics Corporation (NYSE:GD) released its full-year result to the market. The early response was not positive, with shares down 5.2% to US$175 in the past week. General Dynamics reported in line with analyst predictions, delivering revenues of US$39b and statutory earnings per share of US$11.98, suggesting the business is executing well and in line with its plan. Following the result, 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 thought readers would find it interesting to see analysts' latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the current consensus from General Dynamics's twelve analysts is for revenues of US$40.8b in 2020, which would reflect a modest 3.7% increase on its sales over the past 12 months. Statutory earnings per share are expected to rise 6.3% to US$12.85. In the lead-up to this report, analysts had been modelling revenues of US$41.0b and earnings per share (EPS) of US$12.94 in 2020. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
It will come as no surprise then, to learn that the consensus price target is largely unchanged at US$208. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on General Dynamics, with the most bullish analyst valuing it at US$255 and the most bearish at US$175 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await General Dynamics shareholders.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. Next year brings more of the same, according to analysts, with revenue forecast to grow 3.7%, in line with its 4.7% annual growth over the past five years. Compare this with the wider market (in aggregate), which analyst estimates suggest will see revenues fall 5.8% next year. So it's pretty clear that General Dynamics is expected to grow slower than similar companies in the same market.
The Bottom Line
The most obvious conclusion from these results is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. The consensus price target held steady at US$208, with the latest estimates not enough to have an impact on analysts' estimated valuations.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple General Dynamics analysts - going out to 2024, and you can see them free on our platform here.
You can also view our analysis of General Dynamics's balance sheet, and whether we think General Dynamics is carrying too much debt, for free on our platform here.
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