When General Dynamics Corporation (NYSE:GD) released its most recent earnings update (01 October 2017), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were General Dynamics’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not GD actually performed well. Below is a quick commentary on how I see GD has performed. Check out our latest analysis for General Dynamics
Did GD beat its long-term earnings growth trend and its industry?
To account for any quarterly or half-yearly updates, I use the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This blend allows me to assess different stocks on a similar basis, using the most relevant data points. For General Dynamics, its latest earnings (trailing twelve month) is $3,239.0M, which compared to the previous year’s figure, has risen by 13.13%. Since these values may be fairly myopic, I have determined an annualized five-year figure for GD’s earnings, which stands at $2,306.0M. This suggests that, on average, General Dynamics has been able to gradually raise its earnings over the past couple of years as well.
What’s enabled this growth? Let’s take a look at whether it is solely owing to industry tailwinds, or if General Dynamics has seen some company-specific growth. In the last couple of years, General Dynamics increased bottom-line, while its top-line fell, by efficiently controlling its costs. This resulted in to a margin expansion and profitability over time. Viewing growth from a sector-level, the US aerospace & defense industry has been growing its average earnings by double-digit 12.42% over the previous twelve months, and a less exciting 4.30% over the previous few years. This means whatever tailwind the industry is benefiting from, General Dynamics is able to amplify this to its advantage.
What does this mean?
Though General Dynamics’s past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I suggest you continue to research General Dynamics to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for GD’s future growth? Take a look at our free research report of analyst consensus for GD’s outlook.