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Will Segmental Performance Aid General Dynamics' (GD) Q2 Earnings?

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General Dynamics Corporation GD is slated to release second-quarter 2021 results on Jul 28, before the opening bell.

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

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

Combat & Marine Segments to Aid Revenues

With respect to the company’s Combat Systems and Marine Systems segments, it is imperative to mention that these segments have been witnessing growth over the past couple of quarters amid the pandemic. This is because the defense business of the nation remained cushioned to a large extent, backed by government support. To this end, we expect the second-quarter results to reflect similar trends.

The Combat Systems unit is estimated to have seen a top-line improvement in the soon-to-be-reported quarter, with the company witnessing growing demand for its Wheeled Combat, Eagle and Stryker vehicles and munitions. The Zacks Consensus Estimate for General Dynamics’ Combat Systems revenues in the second quarter is pegged at $1,775 million, implying a 1.2% year-over-year rise.

Its Marine Systems unit is also 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. Also, Block V Virginia Class and Columbia Class construction volumes can be expected to have favorably contributed to this unit’s revenue performance. The consensus mark for revenues from the Marine Systems segment is pegged at $2,542 million, implying a 2.9% year-over-year improvement.

Aerospace Unit to Receive a Blow

During the first-quarter earnings call, the company anticipated the second quarter to be the most challenging from the perspective of order deliveries. In particular, increased supply-chain issues during the second quarter might have affected deliveries. Such issues could be detrimental for the Aerospace segment’s revenues in the to-be-reported quarter.

The Zacks Consensus Estimate for General Dynamics’ largest segment’s revenues in the second quarter is pegged at $1,717 million, indicating a 13% decline from revenues reported in the year-ago quarter.

Earnings and Revenue Estimates

Projected revenue growth in each of the company’s business segments, except for its largest segment, Aerospace, is likely to have had a neutral impact on its overall top line in the to-be-reported quarter. The Zacks Consensus Estimate for the company’s second-quarter 2021 revenues stands at $9.27 billion, almost in line with the year-ago quarter’s reported figure.

Meanwhile, the Zacks Consensus Estimate for the defense giant’s second-quarter earnings is pegged at $2.52 per share, indicating an improvement of 15.6% from the prior-year quarter's reported number. Gradually improving trends in commercial aerospace during the second quarter and favorable sales mix are expected to have boosted operating profit, thereby favorably contributing to the company’s overall bottom-line growth.

General Dynamics Corporation Price and EPS Surprise

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 predicts 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. 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 +1.98% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks to Consider

Here are a few other defense companies you may want to consider, as these too have the right combination of elements to post an earnings beat this season:

Leidos Holdings LDOS has an Earnings ESP of +4.46% and a Zacks Rank #2.

Lockheed Martin LMT has an Earnings ESP of +0.92% and a Zacks Rank #3.

Hexcel Corporation HXL has an Earnings ESP of +850.00% and a Zacks Rank #3.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Lockheed Martin Corporation (LMT) : Free Stock Analysis Report

General Dynamics Corporation (GD) : Free Stock Analysis Report

Hexcel Corporation (HXL) : Free Stock Analysis Report

Leidos Holdings, Inc. (LDOS) : Free Stock Analysis Report

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