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General Dynamics Tops Earnings Forecast Ahead of Raytheon, Northrop Reports

General Dynamics beat Wall Street's fourth-quarter expectations, one day before Raytheon and Northrop Grumman report.
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General Dynamics (GD) beat Wall Street's fourth-quarter earnings expectations Wednesday, one day before rival defense contractors Raytheon (RTN) and Northrop Grumman (NOC)  report.

The Falls Church, Va., company, which makes Abrams tanks, the Stryker family of vehicles, and light armored vehicles, reported net income of $1.02 billion, or $3.51 a share, up from $909 million, or $3.07, in the year-earlier period. The latest figure beat analysts' forecast of $3.46 a share.

Revenue climbed 3.8% to $10.77 billion, topping Wall Street's estimate of $10.6 billion.

GD shares at last check were little changed at $183.78.

The company's aerospace sector reported revenue of $2.9 billion for the quarter, up 8.4% from a year earlier. General Dynamics' Gulfstream unveiled the G700 and reported the first orders for the new aircraft, scheduled to begin deliveries to customers in 2022.

Combat Systems reported fourth-quarter revenue of $2 billion, up 13%. The segment was selected in 2019 to produce light armored vehicles for the Canadian army.

Northrop Grumman, which is leading the development of the B-21 Raider, is scheduled to report earnings on Wednesday. Analysts expect the company to report a 3% slide in earnings to $4.78 a share and an 8% increase in revenue to $8.8 billion.

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Jim Corridore, an analyst with CFRA, said in a note to investors that he has a strong buy recommendation on Northrop Grumman shares, “reflecting our positive view of defense demand drivers, and NOC's exposure to areas of the military likely to see strong appropriations over the next few years."

"We see defense spending benefiting from the passage of a $716 billion fiscal 2019 defense funding bill," he wrote. 

"We see shareholders benefiting from strong cash flows, which should drive further share repurchases and dividend hikes."

Raytheon, which builds the Patriot missile defense system along with the interceptors
for the Aegis air defense system, is expected on Thursday to report earnings of $3.11 a share, up 6% from a year ago, and revenue increasing 9% to $8 billion.

Raytheon is merging with United Technologies (UTX) , which on Tuesday reported fourth-quarter and full-year earnings that handily beat analysts’ estimates. UTX did warn of headwinds related to the grounding of Boeing's (BA) 737 MAX aircraft.

Also on Tuesday, Lockheed Martin (LMT) shares hit an all-time high after the defense contractor reported stronger-than-expected fourth-quarter earnings as F-35 sales supported aeronautics revenue in the company's battle with Boeing.

Boeing, meanwhile, on Wednesday reported its first annual loss since 1997 as costs linked to the grounded 737 MAX aircraft ballooned by $2.6 billion over the final months of the year.