This morning, General Dynamics Corporation (GD), the manufacturer behind Abrams main battle tanks and Gulfstream executive jets, announced strong earnings, causing their stocks to rise by 6.1% before 10:50 a.m. ET.
Analysts predicted that GD would make a profit of $3.44 per share and generate $12.2 billion in revenue during Q2. However, they actually announced a higher profit of $3.74 per share and reported sales of $13 billion instead.
General Dynamics Q2 earnings
As an observer, I noticed a significant upward trend in sales, with a yearly increase of 8.9%. Additionally, the operating profit margin expanded by 30 basis points to reach 10%. This expansion led to a commendable growth in earnings by 14.7%. The long-serving CEO, Phebe Novakovic, highlighted that every one of the company’s four segments experienced growth in both revenue and earnings. Furthermore, she emphasized that cash flow was robust, and the company’s backlog remains in a healthy state.
It’s quite impressive to see the transformation of the backlog from just healthy to downright fabulous, given General Dynamics’ remarkable achievement of a book-to-bill ratio of 2.2 this quarter. In simpler terms, they’ve managed to secure twice as many new orders compared to what they’re fulfilling and converting into revenue, which is truly noteworthy.
Backlog now stands at $103.7 billion, enough to keep GD humming for the next two years straight.
Is General Dynamics stock a buy?
Using a more conversational tone: General Dynamics has a substantial free cash flow of $4.1 billion, which matches the reported trailing earnings of the same amount. This implies that the company’s profits are genuinely strong. Over the next five years, it is anticipated to outperform and increase its earnings by more than 9% each year. Additionally, General Dynamics offers a decent 2% dividend return to its shareholders.
From these figures, I estimate the stock is worth a minimum of $45 billion, with additional potential value due to the promising future sales growth suggested by its book-to-bill ratio. However, considering today’s surge in price, General Dynamics (GD) stock now costs more than $80 billion – a price tag that seems excessive given current market conditions.
My advice: Wait for better prices before buying GD stock.
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2025-07-23 19:09