Key Takeaways
- General Dynamics (GD) and ADP (ADP) both beat Q2 and Q4 expectations, respectively, driven by strong aerospace demand and expanded service margins.
- Procter & Gamble (PG) delivered a core EPS beat but issued a cautious 2027 outlook, citing eroding pricing power and a looming $1 billion cost headwind.
- Geopolitical tensions surged as U.S. and Saudi forces conducted joint strikes against Iran-backed militias in Iraq, prompting threats of retaliation from Harakat Hezbollah al-Nujaba.
- Anglo American (AAL) is reportedly in advanced talks to divest its De Beers diamond unit for approximately $1 billion, a significant markdown reflecting a structural crisis in the diamond market.
- U.S. mortgage applications fell 6.4% for the week ending July 24, as the 30-year fixed rate climbed to 6.76%, dampening recent housing market momentum.
Defense and Services Lead Earnings Beats
General Dynamics (GD) reported second-quarter 2026 results that surpassed analyst projections, fueled by double-digit growth in its Aerospace and Marine Systems segments. The defense contractor posted EPS of $4.24 on revenue of $14.09 billion, while its total backlog swelled to a massive $136.5 billion, up 32% year-over-year. CEO Phebe Novakovic highlighted the company's "ongoing efforts to increase the pace of execution" as the firm secured $20 billion in new orders during the quarter.
Automatic Data Processing (ADP) also exceeded fiscal fourth-quarter expectations, reporting adjusted EPS of $2.64 against estimates of $2.60. The payroll giant’s revenue reached $5.5 billion, supported by a 15% jump in interest earned on client funds. Looking ahead, ADP provided optimistic guidance for fiscal 2027, projecting adjusted EPS growth of 9% to 11% and revenue growth of 5% to 6%.
P&G Faces Margin Pressure and Weak Guidance
Procter & Gamble (PG) reported a core EPS of $1.43 for its fourth quarter, narrowly beating the $1.41 consensus. However, the consumer staples giant struggled with flat organic volume growth and a 15% decline in GAAP diluted EPS due to higher SG&A costs. The company’s fiscal 2027 guidance of 0% to 3% core EPS growth disappointed investors, as management warned that pricing power is eroding amid a challenging global economic environment.
Escalating Conflict in the Middle East
The geopolitical landscape darkened as U.S. and Saudi Arabian forces launched joint precision strikes against "Iran-aligned terrorists" in Iraq. The strikes, which targeted headquarters in Baghdad and other provinces, were in retaliation for a surge in drone attacks. In response, the Iraqi militia Harakat Hezbollah al-Nujaba vowed that foreign forces would not "desecrate Iraqi soil without paying a heavy price," reporting at least 20 fighters killed in the operations.
Simultaneously, Iran issued a stern warning via the Fars news agency, stating that unauthorized vessels in the Strait of Hormuz would face "immediate action." This follows reports of the Iranian Revolutionary Guard stopping tankers for allegedly using "illegal routes." The maritime friction has already sent fuel prices soaring as the crucial energy chokepoint remains a focal point of the ongoing regional conflict.
Strategic Divestments and Housing Headwinds
In the mining sector, Anglo American (AAL) is nearing a deal to sell its 85% stake in De Beers to a consortium led by former CEO Gareth Penny. The deal, valued at roughly $1 billion, includes a $750 million upfront payment. This price tag represents a fraction of the unit's former value, as the industry grapples with a collapse in Chinese luxury spending and the rising dominance of lab-grown diamonds.
On the domestic front, the Mortgage Bankers Association (MBA) reported a 6.4% decline in weekly mortgage applications. The drop coincides with the 30-year fixed mortgage rate rising to 6.76%, up from 6.69% the previous week. Affordability pressures remain a primary concern for the U.S. housing market as borrowing costs continue to fluctuate near year-highs.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.