GD - General Dynamics rated Outperform in new coverage at William Blair

2023-03-30 09:14:12 ET

General Dynamics ( NYSE: GD ) on Thursday was rated Outperform in new research coverage by stock analysts at William Blair. They said the defense contractor is poised for gains as supply-chain constraints ease.

“General Dynamics’ $132 billion Columbia submarine program is widely considered to be the most important program of the entire U.S. Department of Defense (DoD),” Louie DiPalma, analyst at William Blair, said in a March 30 report. “We believe that Columbia has the least budgetary risk of any DoD program as the centerpiece of the U.S. nuclear triad deterrent strategy.”

War in Ukraine and geopolitical tensions between China and Taiwan, which receives military support from the United States, are driving demand for more advanced weaponry.

“Poland was recently announced as the first U.S. ally to procure General Dynamics’ ( GD ) Abrams tanks—and in our view, it will not be the last,” the report said. “This week, the U.S. Army announced plans to sextuple production within the next five years of 155mm artillery shells, for which General Dynamics ( GD ) is the main producer.”

Gulfstream Demand

The company’s Gulfstream unit is seeing strong demand for private planes as it begins delivering the G700 jet this year.

“Gulfstream has the highest market share in the long-range jet segment of the private aircraft market, the highest profit margin of aircraft peers, and the most premium business aviation brand,” according to William Blair. “We anticipate that Gulfstream’s launch of the new G700 and G800 models this year will enable bookings momentum and margin expansion to continue.”

General Dynamics’ ( GD ) may rise to a range of $254 to $281 a share in the next 12 months. The target is based on applying a 5% discount to a 5% premium to the peer group average price-to-earnings multiple of 17.4 times estimated EPS for 2025, the report said.

“We view General Dynamics ( GD ) shares as having the best potential upside of its peer group as a result of its discounted valuation and favorable strategic positioning across its 10 business units,” according to William Blair.

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