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Will Robust Order Fuel General Dynamics' (GD) Q3 Earnings?

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General Dynamics Corporation (GD - Free Report) is scheduled to release third-quarter 2018 results on Oct 24, before the opening bell.

A notable number of contract wins should boost General Dynamics’ revenues in the third quarter. Moreover, the acquisition of CSRA, which took place at the beginning of April, is likely to drive the company’s operational results.

Let’s take a detailed look at the factors influencing General Dynamics’ quarterly results.

Strong Order Growth to Boost Sales

General Dynamics, being the largest military shipbuilders in the United States, enjoys a steady flow of orders from both the Pentagon and its foreign allies. Keeping up with the usual trend, the company acquired a handful of significant contracts in the third quarter. Evidently, the shipbuilder clinched two contracts worth $3.9 billion each, for the construction of four Arleigh Burke-class destroyers and for the U.S. Army’s Common Hardware Systems-5 (CHS-5) Program.

Apart from these two contracts, General Dynamics was successful in securing a $481-million contract for Columbia-class fleet ballistic missile submarines and a $219-million contract for performing maintenance work on the USS Bonhomme Richard (LHD 6) assault ship. Such impressive contract wins are likely to boost the company’s total revenues in the to-be-reported quarter.

In line with the aforementioned developments, the Zacks Consensus Estimate for the company’s third-quarter sales is pegged at $9.43 billion, reflecting 24.4% year-over-year surge.

Will the Aerospace Segment Witness Improvement?

Though General Dynamics’ Aerospace business segment has not been performing as per expectations in the last couple of quarters, the third quarter results might witness a change in the trend. Alongside winning contracts from the U.S. Air Force, its Gulfstream G500 received both its type certification and production certificate from the U.S. Federal Aviation Administration (FAA), at the early stage of the to-be-reported quarter. These certifications may have led to a handful of deliveries of G500 by General Dynamics. In line with this, the Zacks Consensus Estimate for the segment’s third-quarter revenues is pegged at $2,186 million, reflecting a year-over-year improvement of 9.6%.

CSRA Acquisition to Boost Growth

In the first week of April 2018, General Dynamics successfully completed the acquisition of CSRA Inc., an IT service provider, for $9.7 billion, thereby winning stiff, cut-throat bidding war against CACI International. Management expects the buyout to boost the company’s 2018 revenues by $3.6 billion, which, in turn, should boost the company’s bottom-line growth.

Consequently, the Zacks Consensus Estimate for General Dynamics’ third-quarter earnings is pegged at $2.74, reflecting 8.7% annual improvement.

General Dynamics Corporation Price and EPS Surprise

 

General Dynamics Corporation Price and EPS Surprise | General Dynamics Corporation Quote

What the Zacks Model Unveils

Our proven model does not conclusively show that General Dynamics is likely to beat estimates in the third quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen.

Earnings ESP: General Dynamics has an Earnings ESP of -0.09%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: General Dynamics has a Zacks Rank #3.

Stocks That Warrant a Look

Here are some companies in the Aerospace sector that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

L3 Technologies is expected to report third-quarter 2018 results on Oct 25. The company has an Earnings ESP of +8.05% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Transdigm Group (TDG - Free Report) is expected to report third-quarter 2018 results on Nov 8. The company has an Earnings ESP of +0.78% and a Zacks Rank of #2.

Lockheed Martin (LMT - Free Report) is expected to report third-quarter 2018 results on Oct 23. The company has an Earnings ESP of +1.56% and a Zacks Rank #3.

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