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Reston, Virginia-based General Dynamics Corporation (GD) is an aerospace and defense company that specializes in high-end design, engineering, and manufacturing to deliver state-of-the-art solutions to customers. Valued at a market cap of $65.6 billion, the company offers a broad portfolio of products and services in business aviation; ship construction and repair; land combat vehicles, weapons systems, and munitions; and technology products and services.
This aerospace and defense company’s shares have massively underperformed the broader market over the past 52 weeks. GD has declined 9.4% over this time frame, while the broader S&P 500 Index ($SPX) has gained 22.7%. Moreover, the stock is down 7.3% on a YTD basis, compared to SPX’s 4.5% rise during the same time frame.
Zooming in further, General Dynamics has also lagged behind the Industrial Select Sector SPDR Fund’s (XLI) 17.6% return over the past 52 weeks and 5.3% gain on a YTD basis.
On Jan. 29, GD released its Q4 earnings results and delivered a better-than-expected Q4 net income of $4.15 per share and revenue of $13.3 billion. Moreover, the top line advanced 14.3% year-over-year, while the bottom line improved 14%. However, the results could not impress the investors. Despite reporting above-par performance, shares of GD fell 4.2% on the same day. The company experienced growth across all of its business segments. But, what disappointed investors was the company's softer-than-expected performance in some of its key business units.
For the current fiscal year, ending in December, analysts expect GD’s EPS to grow 8.8% year over year to $14.83. The company’s earnings surprise history is mixed. It topped the Wall Street estimates in one of the last four quarters while missing on three other occasions.
Among the 22 analysts covering the stock, the consensus rating is a “Moderate Buy,” which is based on nine “Strong Buy,” one “Moderate Buy,” 11 “Hold,” and one “Strong Sell” rating.
This configuration is significantly less bullish than three months ago, with 15 analysts suggesting a “Strong Buy” rating.
On Jan. 30, RBC Capital Markets maintained a “Sector Perform” rating on GD and lowered its price target to $280, which indicates a 14.7% potential upside from the current levels.
The mean price target of $296.30 represents a 21.3% upside from GD’s current price levels, while the Street-high price target of $345 suggests an upside potential of 41.3%.
