Near-Term Headwinds Weigh on 2023 Outlook, but General Dynamics’ Orders Remain Strong

Wide-moat-rated General Dynamics delivered solid fourth-quarter results, driven by strength in its combat systems and aerospace segments. For the full year, it posted sales of $39.4 billion (up 2% year over year) and generated a segment operating margin of 10.7% (down 10 basis points). Management issued 2023 sales guidance that fell short of our forecast due to ongoing supply bottlenecks for defense programs. The company’s expectations for mid-single-digit top-line growth and modest margin expansion are driven by an expected uptick in commercial aircraft deliveries.