Back to top

Image: Bigstock

Will Segmental Performance Aid General Dynamics (GD) Q1 Earnings?

Read MoreHide Full Article

General Dynamics Corporation (GD - Free Report) is slated to release first-quarter 2021 results on Apr 28, before the opening bell.

Improved performance in the company’s segments is likely to have positively impacted the upcoming results.

Let’s take a detailed look at the factors influencing General Dynamics’ first-quarter performance.

Will Aeronautics Unit Witness Growth in Q1?

General Dynamics’ Aerospace segment suffered in the first three quarters of 2020 due to the fairly low aircraft demand and supply-chain issues, courtesy of the COVID-19 pandemic’s impact on commercial aerospace. However, results improved in the fourth quarter as the unit was able to deliver a total of 40 aircraft. We expect similar delivery trends to have taken place in the first quarter as well, considering the slowly recovering air traffic figures. This, in turn, is likely to have boosted the unit’s performance in the soon-to-be-reported quarter.

Notably, the Zacks Consensus Estimate for this unit’s revenues stands at $1,708 million, indicating 1% growth from the prior-year quarter’s reported figure.

Other Segments to Aid

With respect to the company’s Combat Systems, Mission and Marine Systems segments, it is imperative to mention that these segments witnessed growth amid the pandemic, since the defense business of the nation remained cushioned to a large extent, backed by government support. To this end, we expect the first-quarter results to reflect similar trends.

The company’s Marine Systems unit is expected to have witnessed revenue growth, as General Dynamics continues to foresee expanding demand for submarines, surface combat, and support ships, and other overhaul work. Its Combat Systems unit is also estimated to have achieved a top-line improvement in the soon-to-be-reported quarter, with the company witnessing a growing demand for its Stryker vehicles and munitions.

The Zacks Consensus Estimate for General Dynamics’ Combat Systems segment’s revenues in the first quarter is pegged at $1,801 million, implying a 1% year-over-year rise in revenues. The consensus mark for revenues from the Marine Systems segment is pegged at $2,342 million, implying a 4.3% year-over-year improvement.

The Zacks Consensus Estimate for its Information segment’s revenues implies a massive 58.1% surge from the figure reported in the year-ago quarter. This could be attributed to the increased demand for its electro-optical infrared systems, infrared lenses, optical systems and components in recent times.

Earnings and Revenue Estimates

Projected revenue growth in each of the company’s business segments is likely to have aided its overall top line in the to-be-reported quarter. The Zacks Consensus Estimate for the company’s first-quarter 2021 revenues stands at $8.98 billion, indicating a 2.6% rise from the year-earlier quarter’s reported figure.

However, the Zacks Consensus Estimate for the defense giant’s first-quarter earnings is pegged at $2.31 per share, indicating a decline of 4.9% from the prior-year quarter's reported number. This could likely be due to the increased work getting executed on the first two cost-plus Columbia submarines, which in turn might have led to escalated costs.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for General Dynamics this time around. 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 this is 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 -0.25% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

General Dynamics Corporation Price and EPS Surprise

Stocks to Consider

Here are some defense companies you may want to consider, as these have the right combination of elements to post an earnings beat in their upcoming releases:

The Boeing Company (BA - Free Report) has an Earnings ESP of +5.55% and a Zacks Rank #3.

Heico Corporation (HEI - Free Report) has an Earnings ESP of +4.94% and a Zacks Rank #3.

Triumph Group, Inc. (TGI - Free Report) has an Earnings ESP of +9.80% and a Zacks Rank #3.

Zacks' Top Picks to Cash in on Artificial Intelligence

In 2021, this world-changing technology is projected to generate $327.5 billion in revenue. Now Shark Tank star and billionaire investor Mark Cuban says AI will create "the world's first trillionaires." Zacks' urgent special report reveals 3 AI picks investors need to know about today.

See 3 Artificial Intelligence Stocks With Extreme Upside Potential>>