General Dynamics (GD) Hits 52-Week High as Backlog Rises - Analyst Blog

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On Nov 28, 2014, shares of General Dynamics Corp. (GD) soared to a new 52-week high of $146.13, finally ending the trading session a little lower at $145.36. This defense prime with a market cap of around $48.2 billion has seen its shares rise roughly 52.1% so far this year, outperforming the 11.9% gain of the S&P 500 over the same period.

What's Driving General Dynamics Up?

General Dynamics is one of the largest U.S. defense contractors whose revenue exposure is spread over a broad portfolio of products and services that help it to keep the overall growth momentum steady. The company is one of the two contractors equipped to build nuclear-powered submarines in the U.S. with the other company being Huntington Ingalls Industries (HII).

Since the start of 2014, there have been a number of share price gainers among the pure-play defense majors, with General Dynamics leading the pack, driven by consistent contract wins and a stable third-quarter 2014 performance.

The company posted a 4.91% average positive earnings surprise over the last four quarters. General Dynamics' third-quarter earnings were well supported by its cost control efforts, higher backlog and strong financials, helping it to beat the Street estimates.

Total backlog at the end of the third quarter was $74,433 million, up 55.7% year over year, primarily due to higher backlogs at Combat Systems and Marine Systems.

The maker of Gulfstream jets, tanks as well as U.S. Navy ships raised its 2014 earnings per share guidance to $7.60–$7.70 from $7.40–$7.45 anticipating better margins, a lower tax rate and continued share buybacks.

Although budget sequestration has hurt many programs in the defense space, General Dynamics has been minimally affected. Escalating military tension in the Asia-Pacific region has compelled the U.S. Department of Defense to prioritize the company's prime shipbuilding programs. Earlier this year, the U.S. Navy signed a $17.6 billion multi-year contract with General Dynamics to build 10 Virginia-class submarines.

Zacks Rank

General Dynamics Holds a Zacks Rank #2 (Buy). Some other well-ranked stocks in the aerospace and defense industry include Engility Holdings, Inc. (EGL) and Spirit AeroSystems Holdings, Inc. (SPR). Spirit AeroSystems sports a Zacks Rank #1 (Strong Buy), while Engility carries a Zacks Rank #2.


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GENL DYNAMICS (GD): Free Stock Analysis Report

SPIRIT AEROSYS (SPR): Free Stock Analysis Report

HUNTINGTON INGL (HII): Free Stock Analysis Report

ENGILITY HLDGS (EGL): Free Stock Analysis Report

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