General Dynamics: A Mildly Disappointing Turn

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Right. General Dynamics. It’s all a bit…complicated, isn’t it? Last week’s earnings report. A funny thing happened. Or, well, not funny funny. More…mildly disappointing. Like finding out the organic sourdough you queued for is actually just…sourdough.

They announced earnings of $4.17 a share, beating Wall Street’s rather modest expectation of $4.11. Sales were $14.4 billion – a good $600 million ahead. So, objectively, good news. And yet… the stock promptly decided to stage a little downward protest. Nearly 3% off on earnings day. It continued, naturally, throughout the week. Honestly, it’s like trying to maintain a sensible diet during a crisis. You know what you should do, but… well.

General Dynamics Q4: The Margins, Oh The Margins

It all comes down to margins, doesn’t it? Always. They grew sales by 8%, which sounds impressive until you realise operating earnings only nudged up by 2%. Net earnings actually declined by 0.4%. And earnings per share? A measly 0.5% increase. Basically, they’re working harder to achieve…less. It’s the story of my life, frankly.

Aerospace and technologies divisions were the main culprits, posting weaker margins. Combat systems wasn’t much better. Marine systems, bless its little heart, was the only one showing any real improvement – a 22% revenue surge, 72% jump in operating profit. But it’s still the least profitable division, with a 7.2% margin. It’s like that friend who’s always slightly behind on rent but keeps promising to write the next great novel.

Full Year 2025: A Mixed Bag

Looking at the full year, things are a little brighter. Marine systems and aerospace both managed sales growth of over 16%. (Combat systems and technologies lagged, with growth in the low single digits. Predictable.) Operating profits improved in marine and aerospace too, although combat and technologies were still… underperforming. Profit margins edged higher everywhere except in technologies. Honestly, it’s exhausting just keeping track.

In the end, they earned $15.45 per share on $52.6 billion in sales. Which, on paper, is…fine. But it just doesn’t feel right, does it?

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Is General Dynamics a Buy for 2026? A Question for the Ages

So, 2026. They didn’t actually give us any firm guidance, reserving that little gem for the post-earnings call. Apparently, they’re expecting around $16.15 a share on sales of $54.5 billion. Mid-single-digit growth. 4% to 5%. On a 16 P/E stock. Which, let’s be honest, feels a bit…optimistic. A little bit expensive.

And then there’s the free cash flow, which is lagging behind the reported net income. (Strike two.) The price-to-sales ratio is a heady 1.8. Historically, defence stocks have been fairly valued around 1.4x sales, ideally closer to 1.0x. It’s like buying a vintage dress that’s been marked up 50% because it’s “on trend”. You want it, but…really?

Units of hope lost: 7. Hours spent staring at financial reports: 11. Number of times I’ve considered selling everything and opening a cat sanctuary: 3.

For all these reasons – and despite the initial earnings beat – I’m leaning towards a sell right now. It’s not a dramatic declaration, just a quiet acknowledgement that sometimes, even with the best intentions, things just don’t quite add up.

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2026-02-06 15:14