General Dynamics, a defense contractor that helps build ships and submarines for the U.S. Navy, is the IBD Stock of the Day. GD stock is in a base.
That setup follows a big jump in defense stocks following Russia's invasion of Ukraine, which lifted investors' expectations for greater defense spending in the U.S. and abroad.
Defense peers Northrop Grumman and Lockheed Martin were also in bases. Raytheon was also back below a buy point.
GD Stock
General Dynamics dropped 1.5% to 239.24 in the stock market today, a fairly resilient outcome during a white-knuckle sell-off. The stock remains in a nine-week flat base with a 255.09 buy point. It was working to hold support at its 50-day line.
Aggressive investors could plot an alternative entry at 249.79. They could also step in if the stock breaks above a trendline drawn from a March 7 high, the starting point of the flat base.
The relative strength line of GD stock is near highs not seen since 2019.
Defense peer Northrop Grumman, best known for as the maker of the stealth bomber, added 0.9% to 466.66 on Thursday. Shares were in a cup-with-handle base with a 477.36 buy point.
Lockheed Martin, which manufactures the F-22 and F-35 fighter jets, was down 0.6% to 443.15. That stock was also in a cup-with-handle base, with a 475.60 entry. Lockheed Martin was a recent IBD Stock of the Day.
Missile manufacturer Raytheon fell 1.5% to 96.32. The stock cleared a 104.44 buy point of a flat base last month, but later fell more than 8% below that entry, triggering the automatic sell rule.
General Dynamics Earnings Beat
Along with nuclear-powered submarines and combat and support ships, General Dynamics develops tanks, military technology and Gulfstream business jets.
General Dynamics last month reported first-quarter results that beat expectations. The company cited "continued strong Gulfstream demand," as more people return to flying after the pandemic hit in 2020. GD stock rose after the report.
The company issued the results as the U.S. sends missiles, military equipment and other aid to Ukraine, and as the Biden administration looks to spend more on defense.
General Dynamics, during its first-quarter earnings call, noted that its Abrams battle tank and Stryker wheeled combat vehicle had "considerable support in the U.S. and Abrams interest from U.S. allies is increasing."
"Orders in Europe were higher primarily from negotiations that had been ongoing," CEO Phebe Novakovic said during the call. "The pipeline in Europe, however, has increased as nations are contemplating higher defense spending to respond to the threats."
The results also came as Wall Street tries to parse the impacts of inflation. Novakovic said General Dynamics had raised prices and cut costs and made substitutions on commodities.
Novakovic said that "at the moment, we do not project a margin compression as a result of increased prices."
