On May 14, 2013, shares of General Dynamics
Corporation ( GD ) hit a 52-week high
of $77.00. Operational efficiency, a large number of contracts,
solid liquidity position and effective cash deployment strategy
have led General Dynamics to attain this high.GENL DYNAMICS (GD): Free Stock Analysis ReportINTL BUS MACH (IBM): Free Stock Analysis ReportNORTHROP GRUMMN (NOC): Free Stock Analysis
ReportWESCO AIRCRAFT (WAIR): Free Stock Analysis
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General Dynamics is a well-managed defense prime. Its inventory
turnover of 9.6 times in the trailing twelve months, compared to
only 2.8 times for the Zacks industry average, represents a strong
sign of operational efficiency. In addition, the company's
operational effectiveness is evident in its industry-high Return on
Investment (ROI) of 14.2%. Currently, the company has a current
ratio of 1.39 compared to the Zacks industry average of 1.35.
Also, the company is flooded with a number of sizeable contracts.
Total backlog at the end of the first quarter was $48.5 billion.
Recently, the company introduced a smaller, more-capable Airborne
Acoustic Processing System known as VENOM. This UYS-505 system
leverages commercial-level advances in hardware in order to
maximize the detection of submerged threats in deep and coastal
Moreover, acquisitions made in the past are proving to be
synergistic for the company. Fidelis Security Systems, Inc. that
was acquired by General Dynamics in Aug 2012 recently integrated
its flagship network security solution, Fidelis XPS, with
International Business Machines Corporation 's (
IBM ) security
information and event management product, the IBM QRadar. This
product collaboration will help in protecting customers' valuable
enterprise assets from complex advanced persistent threats.
General Dynamics holds a good liquidity position. The company
continues to be a strong cash generator with cash and cash
equivalents at the end of the first quarter of 2013 of $3.74
billion, up from $3.29 billion at the end of Dec 31, 2012. The
company has a low long-term debt-to-capitalization of 21.1%
compared to Zacks Industry Average was 43.6%.
Also, General Dynamics has an effective cash deployment strategy.
In the first quarter, the company repurchased 1 million outstanding
shares at an average price per share of $70. Also during the
quarter the company increased its dividend by 9.8%, bringing the
quarterly dividend to 56 cents per share or $2.24 on an annualized
basis. This was the company's 16th consecutive annual dividend
increase. With the current price of $76.64, the company generates a
dividend yield of 2.9%.
We expect the incremental dividend and expanded share buybacks to
make the stock more attractive for investors. Also, the company's
sound liquidity position will allow the company to fulfill its
future financial commitments.
General Dynamics currently carries a Zacks Rank #3 (Hold).
Well-placed stocks in the defense industry include Northrop
Grumman Corporation ( NOC ) and Wesco
Aircraft Holdings, Inc. ( WAIR ). Both hold a
Zacks Rank #2 (Buy).