Earnings preview: Order growth to drive General Dynamics Q4 results

General Dynamics Corp. (GD) is set to report its earnings for the fourth quarter on Wednesday before the market opens. The defense contractor’s results will be driven by strong order growth, CSRA integration yielded high-value government contracts and significant progress in the production of nacelles.

Analysts expect General Dynamics to post earnings of $2.99 per share on revenue of $10.36 billion for the fourth quarter. In comparison, during the previous year quarter, the company reported a profit of $2.50 per share on revenue of $8.28 billion. Majority of the analysts recommended a “strong buy” or “buy” rating while expecting the stock to reach $201.63 in the next 52 weeks.

The top line will be benefited by strong order growth and the operational results would be driven by the purchase of CSRA, which was integrated into the Information technology division earlier in April 2018. Since then, CSRA won several high-value deals including government contracts. The company continues to expect the buyout to lift its revenue by $3.6 billion in 2018.

The company is expected to enjoy a steady flow of orders from both the Pentagon and its foreign allies as it is the largest military shipbuilders in the US. In the fourth quarter, General Dynamics purchased significant contracts. The contracts winning will boost its sales growth and consensus estimates show a 25% revenue growth in the fourth quarter.

Also read: General Dynamics Q3 2018 earnings call transcript

In the fourth quarter, the revenue of the Aerospace segment is likely to get a solid boost on the expected delivery of 8 to 10 G500. Gulfstream Aerospace has been making significant progress related to the production of nacelles, post the Nordam Group purchase. During the quarter, deliveries of nacelles are in line to support the G500s deliveries.

In the third quarter, the company posted an 11.4% jump in earnings helped by higher revenue and strong order growth. The top-line benefitted from the recent acquisitions and demand growth across all segments despite growing concern over softness in the deliveries of business aircraft.

Shares of General Dynamics ended Monday’s regular session up 0.58% at $172.21 on the NYSE. The stock has fallen over 23% in the past year while it has risen over 1% in the past three months.

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