Why This Defense Stock Is Set to Take Off in May

NYSE: GD | General Dynamics Corporation  News, Ratings, and Charts

GD – Prominent aerospace and defense industry player General Dynamics (GD) recently reported solid first-quarter results, beating analysts’ earnings estimates. Moreover, this stock might be a top pick for investors looking to capitalize on the growing demand for defense technologies. Keep reading to find out why…

Global air travel demand has been steadily growing since the start of 2023, resulting in increased passenger traffic in all regions. Moreover, U.S. defense contractors have benefited as the war in Ukraine and tense US-China relations have fueled demand for weapons such as tanks, submarines, and munitions.

As a result, General Dynamics Corporation (GD), a leading aerospace and defense company, has seen steady demand growth for its products and services. It reported strong first quarter results, exceeding analysts’ revenue and EPS estimates. Moreover, the company has grown its revenue and EPS at CAGRs of 5.1% and 4.7% over the past five years.

The stock has gained marginally over the past five days, closing the last trading session at $218.13.

Given below are the factors help GD take off in May:

Robust First Quarter Performance

GD’s revenue increased 5.2% year-over-year to $9.88 billion for the fiscal first quarter ended April 2, 2023. The company’s operating earnings rose 3.3% year-over-year to $938 million. Its EPS came in at $2.66, representing an increase of 1.1% year-over-year. Its net income remained flat at $730 million.

Also, net cash provided by operating activities in the quarter totaled $1.50 billion, or 200% of net earnings. The company invested $161 million in capital expenditure and paid $345 million in dividends, ending the quarter with $2 billion in cash and equivalents.

Phebe N. Novakovic, GD’s chairman and chief executive officer, said, “Strong cash flow positions us to continue to invest in our business, retire debt and return value to shareholders.”

Backlog Boom: Solid Growth Outlook

GD reported a consolidated book-to-bill ratio of 0.9-to-1 for the latest quarter. Moreover, the company-wide backlog has increased by 3% from the year-ago quarter to $89.80 billion.

In addition, the estimated potential contract value, which represents management’s estimate of additional value in unfunded IDIQ contracts and unexercised options, was reported at $38.5 billion. When combined with the total backlog, the company’s total estimated contract value stands at an impressive $128.40 billion. These figures indicate a strong pipeline of future business and company growth potential.

Recent Positive Developments

On April 4, 2023, GD’s business unit General Dynamics Information Technology (GDIT), announced that it was awarded the Flight School Training Support Services contract to support the U.S. Army Aviation Center of Excellence. Awarded in March, the $1.70 billion contract, has a five-year base period and seven option years.

Moreover, on March 22, GDIT announced that it was awarded two contracts totaling $380 million by the Environmental Protection Agency (EPA). The contracts expand the company’s technology and scientific research and also support services to enable the agency’s critical environmental and climate initiatives.

Consistent Dividend Growth

On March 8, GD declared a regular quarterly dividend of $1.32 per share on the company’s common stock, payable on May 12, 2023. This marks the 26th consecutive annual dividend increase authorized by the board, representing a 4.8% increase over last year’s dividend.

GD pays $5.28 annually as dividends which translates to a yield of 2.42% at the current price. Its four-year average dividend yield is 2.40%. The company’s dividend payouts have grown at a 7% CAGR over the past three years.

High Profitability

GD’s trailing-12-month net income margin of 8.50% is 27.7% higher than the 6.66% industry average. Its 4.96% trailing-12-month levered FCF margin is 10.4% higher than the industry average of 4.49%. Furthermore, the stock’s trailing-12-month EBIT and EBITDA margins of 11.07% and 13.32% are 15.9% and 1.6% higher than the industry averages of 9.56% and 13.12%.

POWR Ratings Show Promise

GD has an overall rating of B, which equates to a Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. GD has a B grade for Stability, in sync with its 24-month beta of 0.65.

GD is ranked #16 out of 70 stocks in the Air/Defense Services industry.

Click here to access GD’s Growth, Value, Momentum, and Stability.

Bottom Line

Wall Street analysts expect GD to hit $257.70 in the near term, indicating a potential upside of 18.1%.

In the fiscal first quarter, the company received various contracts from the U.S. Army, Navy, and Air Force, as well as from international partners for the production and maintenance of tanks, armored vehicles, munitions, and other military equipment.

Additionally, GD also won contracts to provide technical and support services, training, and information technology solutions to various government agencies. These awards suggest that the company is well-positioned to continue generating revenue and profits from its defense and technology businesses in the coming months and years.

With the increasing global demand for air travel and growing tensions between major countries, the aerospace and defense sector is poised for growth this year. Considering GD’s robust financials, recent positive developments, backlog boom, consistent dividend growth, and high profitability, the stock seems poised to take off in May.

How Does General Dynamics Corporation (GD) Stack Up Against Its Peers?

GD has an overall POWR Rating of B, equating to a Buy rating. Check out these other stocks within the Air/Defense Services industry with an A (Strong Buy) rating: Willis Lease Finance Corporation (WLFC), CPI Aerostructures, Inc. (CVU), and Lockheed Martin Corp. (LMT).

The Bear Market is NOT Over…

That is why you need to discover this timely presentation with a trading plan and top picks from 40 year investment veteran Steve Reitmeister:

REVISED: 2023 Stock Market Outlook > 


GD shares were trading at $214.71 per share on Tuesday morning, down $3.42 (-1.57%). Year-to-date, GD has declined -12.50%, versus a 8.22% rise in the benchmark S&P 500 index during the same period.


About the Author: Kritika Sarmah


Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
GDGet RatingGet RatingGet Rating
WLFCGet RatingGet RatingGet Rating
CVUGet RatingGet RatingGet Rating
LMTGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


Bullish or Bearish Stock Set Up?

The S&P 500 (SPY) record highs sounds pretty darn bullish on the surface. Yet as we dig below the surface there are some curious signals that point more Risk Off. This is especially true as we come into the next Fed meeting after a round of data that points to inflation still being too high...only further delaying the first rate cut. What does this all mean for stocks from here? Steve Reitmeister offers his latest views on the market outlook along with a preview of his top picks to stay on step ahead of the market. Read on for more...

Unveiling Adobe (ADBE) Q2 Earnings: What Lies Ahead for Investors?

Software giant Adobe Inc. (ADBE) has released its second-quarter earnings, revealing double-digit growth in both revenue and profits. Yet, concerns arise around the complexities of navigating growth in the face of advancing AI technologies. Let’s analyze ADBE’s recent performance and assess key fundamentals to uncover what lies ahead for investors…

3 AI Stocks to Invest in for the Next Technological Revolution

The AI market is experiencing a significant growth trajectory, driven by widespread application across various industries. Hence, it could be wise to invest in top AI stocks, Alphabet (GOOGL), Meta Platforms (META), and Alibaba Group Holding (BABA) for the next technological revolution. Read more...

Analyzing Broadcom’s (AVGO) Q2 Earnings: Worth Investing?

Driven by a surge in demand for its AI products, Broadcom (AVGO) reported robust earnings in its latest quarterly results, exceeding expectations on both top and bottom lines. However, is the stock’s recent announcement of a 10-for-1 stock split worth investing in? Keep reading to find out…

Stock Alert: Breakout or Fake Out?

The S&P 500 (SPY) officially made new highs this week. Perhaps a reason to celebrate more gains on the way...or perhaps there are signs this move is hollow leading to more downside soon on the way. To help solve this riddle, 44 year investment veteran Steve Reitmeister shares his views along with a trading plan and top picks to stay on the right side of the action. That is what Steve Reitmeister will cover in his latest commentary below. Read on for more...

Read More Stories

More General Dynamics Corporation (GD) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All GD News