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Will Aerospace Unit Drive General Dynamics' (GD) Q1 Earnings?

Zacks Equity Research

General Dynamics Corporation GD is slated to release first-quarter 2020 results on Apr 29, before the opening bell.

Improved segmental performance is likely to have boosted the performance in the soon-to-be-reported quarter.

Let's see how things are shaping up prior to this announcement.

Aerospace Unit: A Key Catalyst

Over the past few quarters, General Dynamics’ Aerospace segment revenues have witnessed a solid rise, owing to increased G500 and G600 aircraft deliveries. Anticipating a similar trend of deliveries to have taken place during the first quarter, we expect G500 and G600 to have boosted the segment’s revenues in the to-be-reported quarter.

Consequently, the Zacks Consensus Estimate for General Dynamics’ largest segment’s revenues in the first quarter is pegged at $2,266 million, implying a 1.2% rise from revenues reported in the year-ago quarter.

Q1 Backlog to Continue Thriving

General Dynamics has an impressive history of witnessing a steady flow of orders from both Pentagon and its foreign allies, courtesy of the huge demand for its enhanced military shipbuilding capabilities. Notably, during the first quarter, its Mission Systems unit secured a contract for the Army Consolidated Product Line Management Plus (CPM Plus) Program from the Army Contracting Command, worth $883 million. The company also secured a number of other contracts during the quarter. These are expected to get reflected in the company's backlog count in the to-be-reported quarterly results.

Q1 Forecast

Solid revenue growth in majority of the company’s business segments is likely to have boosted the overall top line in the to-be-reported quarter. The Zacks Consensus Estimate for its first-quarter revenues stands at $9.28 billion, indicating a 0.3% increase from the year-earlier quarter’s reported figure.

Moreover, a favorable margin performance along with the reduction in per-unit manufacturing costs for the G500 and G600 aircraft has been a key catalyst for the company’s bottom line in the first quarter.

In line with this, the Zacks Consensus Estimate for the defense giant’s first-quarter earnings is pegged at $2.57 per share, indicating a marginal rise of 0.4% from the prior-year quarter's reported number.

General Dynamics Corporation Price and EPS Surprise

General Dynamics Corporation Price and EPS Surprise

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

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for General Dynamics this earnings 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. But that’s not the case here. 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 -0.51% and a Zacks Rank #4 (Sell).

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:

Northrop Grumman Corp. NOC is scheduled to report first-quarter 2020 results on Apr 29. The company has an Earnings ESP of +1.66% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Huntington Ingalls Industries HII is scheduled to report first-quarter 2020 results on May 7. The company has an Earnings ESP of +1.79% and a Zacks Rank #3.

Curtiss-Wright Corporation CW is scheduled to report first-quarter 2020 results on May 7. The company has an Earnings ESP of +1.75% and a Zacks Rank #3.

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