General Dynamics (GD) to Beat on Earnings this Season
General Dynamics Corp. (GD) is set to release its third-quarter 2014 results before the opening bell on Wednesday, Oct 22. We expect the company to beat expectations when it reports its third-quarter results.
In the preceding quarter, General Dynamics delivered a positive 6.82% earnings surprise. Also, the company has posted an average positive earnings surprise of 5.46% over the past four quarters.
Let us see how things are shaping up prior to this announcement.
Why a Likely Positive Surprise?
Our proven model shows that General Dynamics is likely to beat earnings because it has the right combination of two key ingredients.
Positive Zacks ESP: Earnings ESP which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is at +0.52%. This is a meaningful and leading indicator of a likely positive earnings surprise for shares.
Zacks Rank: The company currently has a Zacks Rank #2 (Buy). Note that stocks with Zacks Rank #1, 2 and 3 have a significantly higher chance of beating earnings.
Conversely, Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
The combination of General Dynamics’ Zacks Rank #2 and +0.52% ESP makes us very confident of an earnings beat on Oct 22.
What is Driving the Better-than-Expected Earnings?
The company’s diversified business contributes to steady contract flows. Recently, the company has secured a record $17.6 billion long-term navy contract.
The company raised its full-year earnings per share guidance to $7.40–$7.45 from $7.05–$7.10 on its second quarter earnings call, anticipating better margins and a lower share count.
General Dynamics is proactive in lowering costs and improving competitiveness. In a ploy to avert budget austerities, it decided to merge General Dynamics Advanced Information Systems and General Dynamics C4 Systems into a new business unit, General Dynamics Mission Systems. The restructuring − effective from Jan 2015 – is expected to make the company more efficient, cost-effective and responsive to customer needs.
Jet sales at the Gulfstream business continue to see traction even in the slowing defense sales scenario. The G650 large-cabin business jet is in high demand, with orders booked for the next five years. In addition, with worldwide passenger traffic estimated to increase 5.8% in 2014, the aviation market is poised for future growth, which in turn will offer encouraging prospects to General Dynamics.
A large percentage of General Dynamics’ business has thrived in spite of U.S. budget deficits.
Other Stocks to Consider
General Dynamics is not the only firm looking up this earnings season. We also see likely earnings beats coming from these industry peers:
Curtiss-Wright Corporation (CW) has an Earnings ESP of +2.30% and sports a Zacks Rank #1 (Strong Buy).
Northrop Grumman Corp. (NOC) has an Earnings ESP of +0.46% and holds a Zacks Rank #3 (Hold).
Rockwell Collins Inc. (COL) has an Earnings ESP of +2.38% and carries a Zacks Rank #3 (Hold).
Read the Full Research Report on NOC
Read the Full Research Report on COL
Read the Full Research Report on GD
Read the Full Research Report on CW
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