Argus On General Dynamics: We've Been Waiting For This Moment, Time To Buy Shares

• General Dynamics Corporation GD shares are down 5 percent in the last three months, slipping below the $150 mark on August 20, and remaining there since.
• Argus’ John Eade upgraded the rating on the company from Hold to Buy, while establishing a price target of $160.
• Shares have pulled back over the past quarter, while the company announced another EPS beat in 3Q, Eade said.

Analyst John Eade said that the recent pullback in shares, albeit modest, has improved valuations. General Dynamics' shares declined 6 percent over the past quarter, versus a 1 percent downturn in the S&P 500.

“General Dynamics' diversified business mix is attractive compared to those of many peers,” Eade wrote. He elaborated that only 62 percent of its revenue came from the US government, which lowered the company's exposure to “the ongoing budget debates in Washington.”

General Dynamics reported its 3Q EPS ahead of consensus expectations. The company’s revenue came in at $8.0 billion, representing 3 percent y/y growth, while earnings from operations grew 5.6 percent to $733 million, backed by margin expansion. EPS grew 11 percent to $2.28 on the back of share buybacks, as compared to the consensus forecast of $2.13.

Eade stated, “Management is focused on driving growth through modest sales increases, ongoing margin improvement, and share buybacks, and has a history of delivering positive EPS surprises.” Moreover, General Dynamics has been generating robust cash flow and aggressively returning cash to shareholders through dividend hikes.

General Dynamics has raised its 2015 EPS guidance from $8.70-$8.80 to $8.90-$9.00.