Stock Analysis: Is it the right time to invest in General Dynamics (GD)?

General Dynamics Corporation (NYSE: GD) has long been a favorite among investors, thanks to the thriving stock that has consistently delivered steady returns. Moreover, the diversified defense company is a dividend aristocrat offering handsome yields. It has hiked dividends regularly for over 25 years, a trend that should continue in the coming years.

The company, which supplies aerospace and military equipment to private customers and the government, deals in a wide range of products including weapons systems and tanks. Shares on General Dynamics have been on a steady uptrend since the beginning of 2021, though the momentum waned a bit last week after the company reported mixed results for the third quarter.

A Wise Bet?

The recession-proof business model and strong fundamentals make it one of the safest Wall Street stocks with the potential to add value to investors’ portfolios. Experts see a 10% growth through next year. The impressive cash flow sets the right backdrop for returning capital to shareholders on a regular basis, which is good news for income investors and long-term holders. Given the strong prospects on the yield front, the valuation looks right at the moment.

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Read management/analysts’ comments on quarterly reports

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After a lull, aerospace orders are once again picking up even as markets started reopening. Recently, the company’s information technology division received a five-year, $190-million, contract for enterprise cloud modernization from the United States Patent and Trademark Office. The wide range of product offerings and diversified clientele make the business immune to seasonal and cyclical factors.

Mixed Q3

In the quarter ended September 2021, General Dynamics’ earnings increased to $860 million or $3.09 per share from $834 million or $2.90 per share last year and topped Wall Street’s expectations, as they did in each of the trailing two quarters. The strong bottom-line performance reflects a 2% increase in revenues to $9.6 billion, though it fell short of expectations. The management bets on new contract wins and order recovery to sustain the current momentum.

“We enjoyed a very good growth in the defense businesses in the quarter and had a very solid quarter from an earnings perspective across the board. The year-to-date results give us a solid start to the year and enable us to raise our forecast for the full year, which I will share with you at the end of these remarks. So let me move right into some color around the performance of the business segments, have Jason add color around cash, backlog, taxes and deployment of cash, and then I’ll provide updated guidance and answer your question,” said CEO Phebe Novakovic.

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Lockheed Martin Earnings: 3Q21 Key Numbers

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GD closed the last session up 1.5%, after trading higher throughout the day. The stock has gained more than a third over the past eleven months, mostly trading near the $200 mark.