A month has gone by since the last earnings report for General Dynamics (GD Quick QuoteGD - Free Report) . Shares have added about 2.4% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is General Dynamics due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

General Dynamics' Q2 Earnings Beat, Backlog Up Y/Y

General Dynamics Corporation reported second-quarter 2020 earnings from continuing operations of $2.18 per share, which beat the Zacks Consensus Estimate of $2.14 by 1.89%. Operating earnings, however, plunged 21.3% from $2.77 per share in the year-ago quarter.

Total Revenues

General Dynamics’ second-quarter revenues of $9,264 million surpassed the Zacks Consensus Estimate of $9,113 million by 1.7%. However, revenues declined 3% from $9,555 million in the year-ago quarter.

Backlog

General Dynamics recorded a total backlog of $82.7 billion, up 22% year over year. The year-over-year increase was owing to higher orders received by the Marine System segment. Funded backlog at the quarter-end was $54.4 billion.

Segmental Performance

Aerospace: The segment reported revenues of $1,974 million, down 7.6% year over year. However, operating earnings of $159 million plunged 52% from the prior-year quarter’s $331 million.

Combat Systems: Segment revenues rose 5.7% from the prior-year quarter to $1,754 million. However, operating earnings were down 1.2% from the year-ago quarter to $239 million.

Information Systems and Technology: The segment reported revenues of $1,884 million, which declined 12.7% year over year. Operating earnings also dropped 46.1% from the prior-year period to $83 million.

Marine Systems: The segment’s revenues of $2,471 million were up 6.3% from the year-ago quarter’s $2,325 million. Operating earnings also improved 1.5% from the year-ago level to $200 million.

Mission Systems: The segment’s revenues of $1,181 million declined 7.5% from the year-ago quarter’s $1,277 million. Operating earnings of $164 million, however, increased 1.2% from the year-ago quarter’s $162 million.

Operational Highlights

Company-wide operating margin contracted 230 basis points (bps) to 9.1% from the year-ago quarter’s 11.4%.

In the quarter under review, General Dynamics’ operating costs and expenses declined 0.5% from the year-ago period to $8,423 million.

Interest expenses in the reported quarter increased 10.9% year over year to $132 million.

Financial Condition

As of Jun 28, 2020, General Dynamics’ cash and cash equivalents were $2,300 million compared with $902 million on Dec 31, 2019.

Long-term debt as of Jun 28, 2020, was $10,470 million, which escalated from the 2019-end level of $9,010 million.

At the end of the first half of 2020, the company generated cash from operating activities of $177 million against $504 million used in the year-ago period.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

At this time, General Dynamics has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, General Dynamics has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.