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General Dynamics Corp GD

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We're Lowering General Dynamics' Fair Value Estimate to $181 on a Slower Business Jet Recovery

Burkett Huey, CFA Equity Analyst

Analyst Note

| Burkett Huey, CFA |

General Dynamics reported a solid third quarter, as its defense businesses continue to benefit from a strong operating environment, but its cyclical business jet segment faces demand challenges. We are lowering our fair value estimate to $181 per share from $185 as we account for lower Gulfstream deliveries in 2021 due to the G550 leaving production and a lack of production increases on other programs. Earnings per share declined 7.6% to $2.90 per share on a sales decline of 3.4% and 100 basis points of margin compression.

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Company Profile

Business Description

General Dynamics is a long-cycle defense contractor and business jet manufacturer. The firm’s segments include aerospace, combat systems, marine, information technology, and mission systems. The company’s aerospace segment creates Gulfstream business jets. Combat systems mostly produces land-based combat vehicles, such as the M1 Abrams tank. The marine subsegment creates nuclear-powered submarines, among other things. The information technology business primarily serves the government market. The mission systems segment focuses on products that provide command, control, computers, intelligence, surveillance, and reconnaissance capabilities to the military.

11011 Sunset Hills Road
Reston, VA, 20190
T +1 703 876-3000
Sector Industrials
Industry Aerospace & Defense
Most Recent Earnings Sep 30, 2020
Fiscal Year End Dec 31, 2020
Stock Type High Yield
Employees 102,900