Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

General Dynamics Corporation (GD) Beats on Earnings Yet Still Disappoints

General Dynamics Corporation (NYSE:GD)‘ earnings report this past week continued a trend of stronger-than-expected results out of America’s defense contractors. Make sure to read that with the emphasis on “than expected,” however — because objectively speaking, the news really wasn’t that great.

Earnings per share grew barely more than 2% year over year, and while that did in fact beat analyst estimates, management had to do some aggressive rounding up to claim its headline number of “2.3 percent” growth. In fact, net profits at the company increased less than 1%, and the stronger per-share performance owed largely to stock buybacks. Revenues, meanwhile, actually declined a small fraction of one percent, to $7.9 billion.

General Dynamics Corporation (NYSE:GD)Second verse, same as the first
Don’t expect to see that situation improve much any time soon. In its press release, General Dynamics Corporation (NYSE:GD) noted that it ended Q2 with total backlog of $49.4 billion. Adding to the estimated work that the company will receive from ongoing indefinite delivery, indefinite quantity contracts and as-yet unexercised options on contracts it’s won, management figures its total, real backlog is probably close to $77.1 billion.

What management didn’t mention was that a year ago, it was estimating total backlog at more than $78 billion. With backlog shrinking, there’s less work to be done in the future. Consequently, you can expect the company to book fewer revenues going forward as well.

Free cash flow at the firm weakened significantly, with H1 cash profits now trailing reported net income by a good 24.5%. (Put another way, for every $1 in “net profit” the company says it’s earning, General Dynamics Corporation (NYSE:GD) actually collected only about $0.76.)

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.