General Dynamics Corporation
) announced that its board of directors has officially approved the
buyback of 10 million shares of the company's outstanding common
stock on the open market. The company also declared its normal
quarterly dividend of 51 cents, which it expects to pay on August
10, 2012, to shareholders of record at the close of business on
With no shares remaining under a prior authorization, the
General Dynamics board had authorized to repurchase 10 million
shares of common stock in October 2011. In the first quarter of
2012, the company had repurchased 1.4 million of outstanding shares
on the open market at an average price of $72 per share. As of
April 1, 2012, the company approximately had 8.6 million shares
left for repurchase with about 2% of total shares outstanding.
In March 2012, General Dynamics had increased its quarterly
dividend by 8.5%, thus raising its quarterly dividend to 51 cents
per share from the previous payout of 47 cents per share.
In this context, General Dynamics' peer
Lockheed Martin Corporation
) had received authorization in September 2011 to buy back up to an
additional $2.5 billion shares under its share repurchase program.
It had also increased its quarterly dividend from 75 cents per
share to $1.00 per share.
General Dynamics has a good liquidity position to back up its
share repurchase and dividend plans. Cash and cash equivalents as
of March 31, 2012, were $2.6 billion versus $2.5 billion as of
March 31, 2011. Net cash provided by operating activities during
the quarter was $414 million compared with $328 million in the
In the first quarter of 2012, the company clocked pro forma
earnings of $1.70 per share, above the year-ago figure of $1.64,
driven by uninterrupted growth at the Aerospace segment, efficient
execution of programs and its ability to make optimum use of
opportunities. Going forward, we expect an improving business jet
market, a stable business of U.S. military vehicles, and strong
cash flow generation to act as key growth drivers of the
However, we expect the growth to be hindered by threat of budget
cuts, steadily dropping order backlog, and risks related to the
execution of key projects. The company presently retains a
short-term Zacks #3 Rank (Hold) that corresponds with our long-term
Neutral recommendation on the
Based in Falls Church, Virginia, General Dynamics is a market
leader in business aviation; land and expeditionary combat systems,
armaments and munitions; shipbuilding and marine systems; and
information systems and technologies.
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