General Dynamics Corporation Approves 10M Shares Buyback

The shares of General Dynamics were trading lower in the late afternoon trading today

The board of directors of General Dynamics approved a 10 million shares buyback of its outstanding common stock in the open market.

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The stock price of the General Dynamics climbed to as much as $139.26 per share earlier today. However, the stock declined 1.69% to $136.95 per share around 3:12 in the afternoon in New York.

General Dynamics is one of the market leaders in the aviation, combat vehicles, weapons systems and munitions; shipbuilding, communications and information technology systems businesses.

General Dynamic’s financial performance

Over the past 52-weeks, the shares of General Dynamics traded as much as $146.1, per share and as low as $101.51 per share. The company’s stock still gained around 31% over the past year.

Last month, General Dynamics reported that its net earnings increased 50% to $2.12 per share on $8.36 billion in revenue during the fourth quarter.  Its company-wide operating margins increased by 130 basis points to 12.8%.

According to General Dynamics, its Aerospace group experienced strong demand with more aircraft orders than any quarter over the past three years. Its defense groups received significant awards including the $435 million for the U.S. Navy’s Mobile Landing Platform (MLP) Afloat Forward Staging Base (AFSB) and $325 million from the Centers for Medicare &Medicaid Services for contact-center services.

General Dynamics also received a $90 million contract from the Navy for design work on the next-generation ballistic missile submarine and $80 million from the U.S. Army under a foreign military sales contract to upgrade Abrams tanks.

RBC Capital downgraded rating for General Dynamics

Analysts at RBC Capital recently downgraded their stock rating for the shares of General Dynamics from Outperform to Sector Perform with price target of $150 per share.

According to the analysts the downgrade was a valuation call, and they believe that it would be difficult for General Dynamics to repeat its strong performance last year.

They emphasized that the shares of General Dynamics already went up to a level where competitors such as Lockheed Martin and Raytheon offer better valuation.

General Dynamics has a price-to-earnings-to-growth (PEG) ratio of 2.2 at its current level, which is already high for investors to express concern.  The PEG ratio of Lockheed Martin and Raytheon is below 2.