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Will Segmental Sales Drive General Dynamics (GD) Q1 Earnings?

General Dynamics Corporation GD is set to release first-quarter 2024 results on Apr 24, before market open.

The company delivered an earnings surprise of 3.19% in the last four quarters, on average. The strong revenue performance across all of its business segments is likely to have added impetus to its overall first-quarter top line amid supply chain woes.

Aerospace to Post Solid Sales

Solid revenues from Gulfstream aircraft order activity, coupled with significant defense contracts won in prior quarters, are likely to have contributed to the overall revenue performance of the Aerospace unit in the to-be-reported quarter. To this end, our model estimates Gulfstream to deliver 26 jets in the first quarter of 2024, suggesting an improvement from GD’s first-quarter 2023 delivery of 21 jets. Such higher jet deliveries, along with solid demand for aircraft maintenance work, might have bolstered the Aerospace unit’s top line.

The Zacks Consensus Estimate for the Aerospace segment’s revenues in the first quarter is pegged at $2,336.4 million. This indicates a 23.5% increase from revenues reported in the year-ago quarter.

The G700 achieved Federal Aviation Administration certification during the first quarter. We may expect further updates on this matter once GD releases first-quarter 2024 results.

Marine Systems Holds Potential

The Marine Systems unit’s revenues in the to-be-reported quarter are likely to have benefited from the increased sales volume from programs like the Columbia-class submarine. However, the supply chain impact on the Virginia-class submarine deliveries might have affected this segment’s first-quarter results.

The Zacks Consensus Estimate for the Marine segment’s revenues in the first quarter is pegged at $3,050 million. This indicates a 1.9% rise from the year-ago quarter’s reported figure.

Combat Systems’ Sales May Rise

Strong demand for international military vehicles, particularly at Ordnance and Tactical Systems and European Land Systems units, backed by increased demand for weapons systems, munitions and military vehicles, is likely to have augmented Combat Systems’ first-quarter revenues.  Increased artillery production might have also boosted this unit’s top-line performance.

The Zacks Consensus Estimate for the Combat Systems segment’s revenues in the first quarter is pegged at $1,872.2 million. This indicates a 6.6% rise from the year-ago quarter’s reported figure.

Technologies Unit to Remain Steady

Strong demand for IT services and inorganic growth from the acquisition of a C5ISR solutions business are likely to have favored the Technologies unit’s revenues in the first quarter of 2024. However, the emissions systems are expected to have witnessed a slowdown due to a transition from legacy systems and a slow ramp-up on new programs, which in turn might have hurt the overall top-line performance for this segment.

The Zacks Consensus Estimate for the Technologies segment’s revenues in the first quarter is pegged at $3,266.2 million. This indicates a mere 0.8% rise from the year-ago quarter’s reported figure.

Backlog Shows Strength

A strong backlog indicates positive prospects for a company. In this context, our model suggests year-over-year growth rate of 7.3% for GD’s backlog in the first quarter of 2024, indicating high demand for General Dynamics’ products and services.

General Dynamics Corporation Price and EPS Surprise

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

Q1 Expectations

The Zacks Consensus Estimate for GD’s first-quarter revenues is pegged at $10.36 billion, suggesting a 4.8% rise from the year-ago quarter.

Such a solid top-line performance is likely to have aided GD’s first-quarter bottom line. Also, a solid demand environment and lower interest expenses might have had a favorable impact on the company’s overall earnings performance.

The Zacks Consensus Estimate for first-quarter earnings is pegged at $2.95 per share, indicating a rise of 11.7% from the prior-year reported figure.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for General Dynamics this time. This is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for an earnings beat, which is not the case here, as given below.

General Dynamics has an Earnings ESP of -5.76% and a Zacks Rank #3 at present. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Below are three defense stocks that have the right combination of elements to post an earnings beat this time around.

Huntington Ingalls Industries HII has an Earnings ESP of +1.39% and a Zacks Rank #2 at present. HII delivered a four-quarter average earnings surprise of 20.64%. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for HII’s first-quarter sales is pegged at $2.80 billion, suggesting a rise of 4.7% from the prior-year reported figure. The Zacks Consensus Estimate for its first-quarter earnings is pegged at $3.49 per share, suggesting a rise of 8.1% from the prior-year reported figure.

Northrop Grumman NOC has an Earnings ESP of +1.65% and a Zacks Rank #3 at present. NOC delivered a four-quarter average earnings surprise of 5.64%.

The Zacks Consensus Estimate for NOC’s first-quarter sales is pegged at $9.77 billion, suggesting a rise of 5.1% from the prior-year reported figure. The Zacks Consensus Estimate for its first-quarter earnings is pegged at $5.83 per share, indicating an increase of 6% from the prior-year reported figure.

CurtissWright CW has an Earnings ESP of +0.23% and a Zacks Rank #2 at present. CW delivered a four-quarter average earnings surprise of 7.71%.

The Zacks Consensus Estimate for CW’s first-quarter sales is pegged at $663.2 million, suggesting growth of 5.1% from the prior-year reported figure. The Zacks Consensus Estimate for its first-quarter earnings per share is pegged at $1.75, implying a rise of 14.4% from the prior-year reported figure.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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