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Will Aerospace Sales Hurt General Dynamics' (GD) Q2 Earnings?

General Dynamics Corporation GD is scheduled to release second-quarter 2020 results on Jul 29, before the opening bell.

A poor show by the company’s Aerospace Unit might have affected its revenues in the to-be-reported quarter.

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

Aerospace Unit to Receive a Blow

Courtesy of the COVID-19 pandemic, prolonged travel restrictions and low demand across the board are expected to have hit the second-quarter performance of General Dynamic’s Aerospace Unit. At the end of the first quarter, General Dynamics was down on 11 scheduled aircraft deliveries, which eventually didn’t take place. Further, the company was scheduled to deliver three aircraft in May. As travel restrictions are still heavily imposed throughout the world, it can be anticipated that these deliveries have not yet been materialized.

Additionally, increased supply-chain issues during the second quarter might have further affected deliveries. Consequently, the Zacks Consensus Estimate for General Dynamics’ largest segment’s revenues in the second quarter is pegged at $1,495 million, implying a 30% plunge from revenues reported in the year-ago quarter.

Other Factors at Play

The company has been witnessing a modest decline in revenues at its information technology (IT) unit lately, led by the decision to exit its non-core lines of business and the federal civilian division. We may expect the second-quarter results to reflect similar trends. In line with this, the Zacks Consensus Estimate for General Dynamics’ IT segment’s revenues in the second quarter is pegged at $2,029 million, implying a 6% fall from revenues reported in the year-ago quarter.

Q2 Forecast

The revenue dip in majority of the company’s business segments is likely to have negatively impacted the overall performance in the to-be-reported quarter. The Zacks Consensus Estimate for its second-quarter revenues stands at $9.1 billion, indicating a 4.6% decline from the year-earlier quarter’s reported figure.

Notably, the declining revenue expectations for the second quarter are projected to have affected the company’s bottom line as well. Further, the company is expected to have incurred significant costs to sanitize the work environment in its facilities and provide additional PPE kits.

The Zacks Consensus Estimate for the defense giant’s second-quarter earnings is pegged at $2.14 per share, indicating a decline of 22.7% from the prior-year quarter's reported number.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for General Dynamics this earnings season. 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 that’s not the case here.

General Dynamics has an Earnings ESP of -3.93% and a Zacks Rank #4 (Sell). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

General Dynamics Corporation Price and EPS Surprise

General Dynamics Corporation Price and EPS Surprise

General Dynamics Corporation price-eps-surprise | General Dynamics Corporation Quote

Stock to Consider

Here are two stocks from the Aerospace sector you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season.

CurtissWright Corporation CW is scheduled to report second-quarter 2020 earnings on Aug 3. It has an Earnings ESP of +13.62% and a Zacks Rank #3.

Leidos Holdings LDOS is scheduled to report second-quarter 2020 earnings on Aug 4. It has an Earnings ESP of +0.11% and a Zacks Rank #3.

A Recent Defense Release

Lockheed Martin Corp. LMT, a Zacks Rank #3 company, reported second-quarter 2020 adjusted earnings of $6.13 per share, which surpassed the Zacks Consensus Estimate of $5.71 by 7.4%. You can see the complete list of today’s Zacks #1 Rank stocks here

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General Dynamics Corporation (GD): Free Stock Analysis Report

Lockheed Martin Corporation (LMT): Free Stock Analysis Report

CurtissWright Corporation (CW): Free Stock Analysis Report

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

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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.

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