Strong Order Growth To Fuel General Dynamics (GD) Q4 Earnings

General Dynamics Corporation (NYSE:GD) is scheduled to release fourth-quarter and 2018 results on Jan 30, before the opening bell.

A steady trend of contract wins should boost General Dynamics’ revenues in the fourth quarter. Moreover, the acquisition of CSRA is likely to continue driving the company’s operational results.

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

Robust Orders 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 significant contracts in the fourth quarter.

These contracts include a $3.9-billion deal for the construction of four Arleigh Burke-class destroyers. Such massive order growth is likely to have a favorable impact on the company’s backlog, which should reflect in the upcoming quarterly results.

In fact, the company usually wins such contracts, which, in turn, boost its sales growth. Keeping with this trend, we can expect General Dynamics to witness solid revenue growth in the fourth quarter. In line with this, the Zacks Consensus Estimate for the company’s sales in the fourth quarter is pegged at $10.29 billion, reflecting a 24.3% year-over-year surge.

Aerospace Segment Witnesses Growth

General Dynamics’ Aerospace segment’s revenues are expected to receive solid boost in the fourth quarter, with the expected delivery of 8-10 G500s. Moreover, the segment’s Gulfstream Aerospace has been making significant progress on both cost and schedule related to the production of
nacelles, post the NORDAM Group acquisition. Deliveries of nacelles are in line to support the G500s deliveries during the reported quarter.

These developments, in turn, make us confident of possible revenue growth at this business unit. In line with this, the Zacks Consensus Estimate for the segment’s revenues in the fourth quarter is pegged at $2,689 million, reflecting a year-over-year surge of 35.7%.

CSRA Acquisition to Continue Boosting 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. Management continues to expect the buyout to increase its revenues by $3.6 billion in 2018.

As the acquisition turned out to be modestly accretive to third-quarter revenues, we expect this to be accretive to the company’s fourth-quarter revenues as well. This should aid its bottom line. Consequently, the Zacks Consensus Estimate for General Dynamics’ fourth-quarter earnings is pegged at $2.98, reflecting 19.2% annual improvement.

General Dynamics Corporation Price and EPS Surprise