Is this aerospace name a buy?
It's time to explore another aerospace name. Here is the break down on $GD, otherwise known as General Dynamics.
Current Price: $192.45
52/Wk High: $197.51
52/Wk Low: $129.17
Market Cap: $54.4 Billion
Dividend: $1.19 / 2.49% Yield
Read below for the break down!
General Dynamics ($GD) is a major aerospace and defense company that provides products for a bevy of areas including business aviation, weapons systems, combat vehicles, and more.
Breaking down General Dynamics by segment, the company operates within four core segments; Aerospace, Marine Systems, Combat Systems, and the Technologies segment.
The company is led by CEO Phebe Novakovic. Novakovic joined General Dynamics in 2002, eventually working her way up to CEO and President in 2012.
Not only that, but prior to joining General Dynamics, she served as the Special Assistant to the Secretary and Deputy Secretary of Defense from 1997 to 2001.
In recent news General Dynamic’s board of directors approved a major addition to the company’s share buyback program, authorizing the repurchase of an additional ten million shares.
Of late, General Dynamics stock has outperformed, moving over 29% to the upside on a year-to-date basis, leading investors to wonder if the stock is a buy.
Digging into the numbers General Dynamics beat Q1 2021 estimates with an EPS of $2.48, better than the analyst's EPS consensus estimate of $2.30. On a year-over-year basis, EPS improved by 2.06%.
Revenues improved as well, jumping by 7.3% year-over-year to a better $9.4 billion. Sifting through revenues, General Dynamics experienced growth amongst all four segments.
Breaking down revenues by segment, the Aerospace segment delivered 11.6% revenue growth on a year-over-year basis, bringing the segment's total revenue to $1.887 billion.
Furthermore, below is a segment break down of revenues.
Marine Systems: $2.483 B (+10.6%)
Combat Systems: $1.820 B (+6.6%)
Technologies: $3.199 B (+3.1%)
Shifting into margins, operating margin declined on an overall segment basis, with total operating margin landing at 10.0%, 0.7% lower than the Q1 2020 operating margin level.
As for earnings, operating earnings improved by a slim 0.4% on a year-over-year basis, bringing the total operating earnings for Q1 to a solid $938 million.
Net earnings improved as well, with General Dynamics reporting a Q1 2021 net earnings level of $708 million, representing a solid 0.3% jump on a year-over-year basis.
Shifting into the backlog, General Dynamics reported a total backlog of $89.6 billion at the end of Q1, representing a 4.5% jump on a year-over-year basis. Major orders throughout the quarter include orders from the likes of FEMA, the US Army, and Navy.
Management was upbeat.
“Our improved cash outlook enabled us to continue investing in future growth while returning capital to shareholders.”
Shifting into the backlog the numbers are solid.
Total Debt: $13.181 Billion
Total Liabilities: $34.623 Billion
Total Assets: $49.963 Billion
Cash & Short Term Inv: $1.811 Billion
On a valuation basis, General Dynamics does trade at a premium.
Price to Earnings: 17.42x
Forward Price to Earnings: 15.66x
Price to Sales: 1.41x
Price to Book: 3.56x
Price to Cash Flow: 14.57x
Management has been effective.
Return on Equity: 22.21%
Return on Assets: 6.11%
Return on Invested Capital: 9.04%
Given the numbers the analyst’s are bullish with a mean price target of $203.40/share, representing a solid 5.69% gain.
The high price target is $243.00/share, representing a 26.27% upside, while the low price target is $160.00/share, representing a -16.86% downside.
The big money is quite involved as well, with 82.43% of General Dynamics being owned by institutions. Top holders include Longview Asset Management, The Vanguard Group, and Newport Trust Company.
On a technical basis, General Dynamics is extended to the upside. According to the six-month charts the MACD is moving with slight downside momentum within a tight range around 1.1.
The six-month charts are also indicating an RSI of 58.19 and CCI of 125.16, both of which are higher.
Looking to future risks, lower defense spending under a new democratic regime is an investor fear, but insofar, spending has remained consistent.
In short, General Dynamics ($GD) is a solid aerospace and defense company with expanding revenues, a solid management team, and well diversified business portfolio.
EAT - SLEEP - PROFIT
Disclaimer: This is not direct financial advice, simply an opinion based on independent research.