On Apr 4, 2014, we issued an updated research report on
General Dynamics Corp.
). The company was the third largest U.S. defense contractor in
terms of revenue in full year 2013 after
The Boeing Co.
Lockheed Martin Corp.
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General Dynamics is amongst the two contractors equipped to build
nuclear-powered submarines in the U.S. and its revenue exposure
is spread over a broad portfolio of products and services that
will keep the overall growth momentum steady.
The company posted a favorable fourth quarter 2013 performance
primarily on the back of strong Gulfstream margins driven by the
G650, as well as execution from Combat Systems, accompanied with
a drop in both operating and interest expenses.
Notably, jet sales at the Gulfstream business are continuing to
see traction even in the slowing defense sales scenario. G650,
the $60 million top-of-the-line large cabin business jet, sees
brisk high demand, with orders booked for the next five years.
Gulfstream is expected to contribute significantly to General
Dynamics' earnings going forward. The company expects an
approximate 11% year-over-year increase in the group's full-year
2014 revenues driven by continued strong deliveries of Gulfstream
Apart from having a strong order book, General Dynamics'
impressive balance sheet and cash flows provide ample financial
flexibility and a cushion for an incremental dividend and share
Recently, it boosted its quarterly dividend by 10.7%, marking the
17th consecutive increase. The company has increased the
quarterly dividend to 62 cents per share from 56 cents per share,
bringing the annualized payout to $2.48 per share. This comes to
a healthy dividend yield of 2.4% based on yesterday's closing
price of $105.71. The increased dividend will be paid on May 9,
2014, to shareholders of record on Apr 11. With approximately
$2.7 billion of free cash flow exiting 2013, General Dynamics'
solid financial position will easily provide for the payout.
General Dynamics currently has a Zacks Rank #2 (Buy). Other
well-placed stocks in the industry include
Huntington Ingalls Industries, Inc.
) sporting a Zacks Rank #1 (Strong Buy).