On Friday, Bernstein analysts revised their outlook on General Dynamics Corp. (NYSE:GD), reducing the price target from the previous $331.00 to $298.00. Despite the adjustment in price target, the firm maintained a Market Perform rating on the defense contractor’s shares. The company, currently trading at $261.47 with a market capitalization of $71.8 billion, is a prominent player in the Aerospace & Defense industry according to InvestingPro.
The revision follows Bernstein’s updated financial projections for General Dynamics, anticipating fewer deliveries of the G700 aircraft in 2024. However, the analysts expect a brighter revenue outlook for the company’s Combat Systems segment.
At the same time, they have slightly lowered the growth forecast for the Technologies division. The company has demonstrated solid performance with 11.07% revenue growth in the last twelve months, and InvestingPro analysis indicates the stock is currently undervalued relative to its Fair Value.
Bernstein’s new price target is based on a reduced relative enterprise value to EBITDA (EV/EBITDAP) multiple of 86%, a decrease from the previous 98%. This adjustment reflects a shift in the timing of G700 aircraft deliveries, now expected to occur later in 2025 and 2026 rather than in 2024.
In terms of earnings, Bernstein has decreased its adjusted earnings per share (EPS) estimate for 2024 to $13.56, down from the prior forecast of $13.94. Conversely, the analysts have increased their adjusted EPS outlook for 2025 to $16.57, up from the earlier prediction of $16.30. This change in EPS estimates is attributed to the new delivery schedule for the G700 aircraft, an improved longer-term outlook for the Combat Systems segment, and a moderated long-term forecast for the Technologies segment.
Bernstein’s analysis and revised price target reflect their current expectations for General Dynamics’ financial performance in the upcoming years, taking into account the company’s sector-specific developments and market conditions. With the next earnings report due on January 22, 2025, investors seeking deeper insights can access comprehensive analysis and additional ProTips through InvestingPro’s detailed research reports, which offer expert analysis on over 1,400 US stocks.
In other recent news, General Dynamics has been experiencing a series of downgrades from various analysts due to concerns over earnings and revenue projections.
Vertical Research Partners cut the company’s stock rating to ’Hold’, citing challenges in the Marine, Aerospace, and Technologies sectors. RBC Capital Markets and Jefferies also downgraded their ratings, mainly due to slower than expected delivery of Gulfstream jets and margin pressures in the Marine segment.
On a positive note, the company stands to benefit from a $5.7 billion boost in Navy shipbuilding funding, as highlighted by TD Cowen analyst Roman Schweizer. This funding is expected to cover additional non-executive labor costs through 2029 for Virginia-class submarines and the Columbia-class submarine program, which are seen as favorable for General Dynamics and Huntington Ingalls (NYSE:HII).
In addition, General Dynamics has extended its executive consulting agreement with former Executive Vice President of Combat Systems, Mark C. Roualet. This arrangement allows the company to continue benefiting from Roualet’s expertise in the combat systems division.
However, the company’s Technologies division is facing uncertainties due to its exposure to Federal Information Technology and the Department of Government Efficiency. This could negatively affect investor sentiment towards General Dynamics.
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