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Why Is General Dynamics (GD) Down 4.4% Since Last Earnings Report?


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A month has gone by since the last earnings report for General Dynamics (GD). Shares have lost about 4.4% in that time frame, underperforming the S&P 500.

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

General Dynamics Q2 Earnings Top Estimates, Sales Up Y/Y

General Dynamics reported second-quarter 2018 adjusted earnings from of $2.82 per share, which surpassed the Zacks Consensus Estimate of $2.49 by 13.3%.

Excluding one-time items, the company reported GAAP earnings of $2.62 per share, which came in 6.9% higher than the year-ago quarter's earnings of $2.45 per share.

Total Revenues

General Dynamics' second-quarter total revenues of $9,186 million surpassed the Zacks Consensus Estimate of $9,108 million by 0.9%. Reported revenues also increased 19.7% from $7,675 million in the year-ago quarter.

Cash Deployment

The company repurchased 0.9 million of its outstanding shares for $179 million in the second quarter.

Backlog

The company recorded a total backlog of $66.3 billion, up 13.2% year over year. Funded backlog at the quarter end was up 7.2% to $55.41 billion.

Segment Performance

Aerospace : The segment reported revenues of $1,895 million, down 8.8% year over year. Operating earnings of $386 million also declined 8.3% from the prior-year recorded figure of $421 million.

Combat Systems : Segment revenues rose 8.5% to $1,534 million. Operating earnings were also up by 4.9% to $236 million in the quarter.

Information Systems and Technology : The segment reported revenues of $2,442 million, which saw a massive surge of 132.1%. Operating income also surged 79.3% to $156 million.

Marine Systems : The segment's revenues of $2,168 million were up 4.3% from the year-ago figure of $2,079 million. Operating income also improved 9.6% to $195 million.

Mission Systems : The segment's revenues of $1,147 million were up 9% from the year-ago figure of $1,052 million. Operating income was in line with the previous year's figure of $153 million.

Operational Highlights

Company-wide operating margin contracted 210 basis points (bps) to 11.8% from the year-ago quarter's level of 13.9%.

In the quarter under review, General Dynamics' operating costs and expenses rose 22.5% to $8,098 million.

Financial Condition

As of Jul 1, 2018, General Dynamics' cash and cash equivalents were $1,862 million compared with $2,983 million as of Dec 31, 2017.

Long-term debt as of Jul 1, 2018 was $11,397 million, compared to the 2017-end figure of $3,980 million.

As of Jul 1, 2018, the company's cash flow from operating activities was around $291 million compared with $1,010 million in the year-ago period.

Free cash flow from operations at the end of the second quarter was $612 million compared with $386 million in the previous year's second quarter.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

Currently, General Dynamics has a nice Growth Score of B, however its momentum is doing a bit better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

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

Based on our scores, the stock is more suitable for momentum investors than those looking for value and growth.

Outlook

General Dynamics has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Earnings
Referenced Symbols: GD



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