Revenue Miss: General Dynamics Corporation Fell 5.4% Short Of Analyst Revenue Estimates And Analysts Have Been Revising Their Models

As you might know, General Dynamics Corporation (NYSE:GD) recently reported its first-quarter numbers. Revenues came in 5.4% below expectations, at US$8.7b. Statutory earnings per share were relatively better off, with a per-share profit of US$2.43 being roughly in line with analyst estimates. This is an important time for investors, as they can track a company’s performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

Check out our latest analysis for General Dynamics

NYSE:GD Past and Future Earnings May 1st 2020
NYSE:GD Past and Future Earnings May 1st 2020

Taking into account the latest results, General Dynamics’ 15 analysts currently expect revenues in 2020 to be US$39.2b, approximately in line with the last 12 months. Statutory earnings per share are forecast to shrink 6.0% to US$11.22 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$39.3b and earnings per share (EPS) of US$11.35 in 2020. The consensus analysts don’t seem to have seen anything in these results that would have changed their view on the business, given there’s been no major change to their estimates.

There were no changes to revenue or earnings estimates or the price target of US$176, suggesting that the company has met expectations in its recent result. That’s not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on General Dynamics, with the most bullish analyst valuing it at US$225 and the most bearish at US$142 per share. This shows there is still a bit of diversity in estimates, but analysts don’t appear to be totally split on the stock as though it might be a success or failure situation.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It’s pretty clear that there is an expectation that General Dynamics’ revenue growth will slow down substantially, with revenues next year expected to grow 0.8%, compared to a historical growth rate of 5.2% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 2.8% per year. So it’s pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than General Dynamics.

The Bottom Line

The most important thing to take away is that there’s been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations – although our data does suggest that General Dynamics’ revenues are expected to perform worse than the wider industry. The consensus price target held steady at US$176, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn’t be too quick to come to a conclusion on General Dynamics. Long-term earnings power is much more important than next year’s profits. At Simply Wall St, we have a full range of analyst estimates for General Dynamics going out to 2024, and you can see them free on our platform here..

And what about risks? Every company has them, and we’ve spotted 2 warning signs for General Dynamics (of which 1 can’t be ignored!) you should know about.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

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