Summary
- General Dynamics shares have pulled back enough for investors to get another opportunity to add shares to their portfolio.
- GD offers a broad range of products through its portfolio.
- This makes the company a diversified defense sector play.
- Shares currently trade off their 52-week high, and the dividend was just raised.
- I now have General Dynamics and Lockheed Martin in the portfolio for a well-rounded investment in the defense space.
General Dynamics (GD) is primarily known as a producer of defense equipment. The company has an aerospace division, combat division, marine division, information technology division, and a mission systems division. Each one complementing each other in enhancing technology and offerings to provide superior products. As a producer of military equipment, the company benefits from strong defense budgets and awarded military contracts. However, the stock can be swayed if the defense budget is viewed as being cut. While some investors would consider the stock an industrial, I consider it less so due to the need for its products no matter the economic state of the country. As the shares trade far from their 52-week highs, and down from recent levels, we take a look to see how the company is performing and if the valuation makes sense to start a position at these levels.
Performance
General Dynamics recently reported earnings that beat on both the top and bottom lines.
Source: Seeking Alpha
The company saw growth in every almost every operating segment except for IT systems. This helped it grow 4%, but the decline in IT actually lowered the overall revenue growth quite a bit. "Aerospace" saw growth of 12.7%, "Combat Systems" saw a nice increase of 8.1%, "Information Technology" saw revenue decline 11.6%, "Mission Systems" grew 11.3%, and "Marine Systems" saw a nice gain of 7.2%.
Operating margins continued to expand which helps drive profitability growth faster than revenue growth.
