Investors Consistently Win with General Dynamics By TipRanks

I have been recommending General Dynamics Corporation (NYSE:) to retail value investors for nearly a decade and I am bullish on the stock today.

GD is a Blue Ribbon Company

Five business groups comprise GD: Aerospace, Marine Systems, Combat Systems, Technologies, and Gulfstream Business Jets. Fortune ranks GD at 13 on its Blue Ribbon List of the “best of the Best” companies. Moreover, GD has rewarded investors with 24 annual consecutive increases in its dividend. The yield (FWD) is a respectable 2.4%.  

GD holds about $130 billion in all backorder components at the close of the second quarter. The stock is up 38.8% over the past 12 months. (See GD stock charts on TipRanks)

The average General Dynamics price target from six analysts is $216.17 per share, implying an upside of 9.08%. I believe that is a conservative estimate. I value the stock at around $240 per share, with all its back orders and pending military spending on weapons systems, especially for the Navy, technologies, Space Force, and Gulfstream.  

Q2 ’21 net earnings were up about 18% year over year and EPS +19.7%. The company holds $4.75 billion in cash from operations and enjoys a healthy free cash flow. Also, Gulfstream order activity is rollicking as the economy emerges from the pandemic.

Expect More Defense Money for Shipbuilding

GD holds an “Outperform” TipRanks Smart Score of 9, with analysts rating GD a Moderate Buy and TipRanks Investors neutral. I think the future is brighter for the stock. Hedge fund activity is on the upswing. GD technicals are in positive territory. Insider buying is strong over the past year, especially in March, June, and September, as the share price climbed. Positive sentiment prevails, as reflected in the short interest rate of one percent.

Additionally, the Pentagon budget will get an estimated four percent boost to counter increases in China’s defense spending. Moreover, foreign policy defense experts are calling for significant upgrades to the U.S. Navy, as it is the primary conventional deterrence to China’s recent flexing of military muscle.

Also of note, America’s supply chain problems exist for the U.S. Army too. The Navy delivers everything from food, to fuel, to munitions. Also, ships are needed to keep the sea lanes open. Fortunately for GD, the company is one of the primary shipbuilders and retrofitters for the Navy at GD’s Bath Iron Works, Electric Boat, and NASSCO divisions.

Another likely source of income for GD is the U.S. Department of Defense (DOD), which hopes for a record amount of money next year. Specifically, it has requested $122 billion for technologies development in microelectronics, hypersonics, artificial intelligence (AI), and cyber security. GD can expect a large share of this money to be awarded to its tech division.

Downside Pressures on GD Stock

The risks facing GD are, first, its net debt of $11.4 billion. Yet that is down $900…