On Thursday, Goldman Sachs revised its stance on General Dynamics Corp. (NYSE: NYSE:GD), downgrading the stock from Neutral to Sell and reducing the price target to $245 from $283. The investment firm cited various challenges across the company's business segments as the rationale behind the downgrade.
With a market capitalization of $72.7 billion, General Dynamics has demonstrated resilience through its 46-year track record of maintaining dividend payments. InvestingPro data shows the stock is currently trading near its 52-week low, with technical indicators suggesting oversold conditions.
According to the analyst from Goldman Sachs, General Dynamics is facing fundamental difficulties in all four of its business areas. The analyst's projections are more conservative than the market consensus, suggesting potential risks to the company's earnings power. This could lead to a devaluation of the stock if earnings do not meet market expectations.
Despite these concerns, InvestingPro analysis indicates the stock may be undervalued at current levels, with 12 additional exclusive insights available to subscribers.
In the Technologies segment, slower growth has been observed compared to industry peers, compounded by risks associated with the Department of Defense's evolving priorities. The Marine segment is experiencing margin pressures due to increasing costs in U.S. Navy shipbuilding that have not been fully accounted for in pricing.
Furthermore, the Combat segment's rapid growth, partly attributable to munitions, is now up against challenging comparisons. There is also the possibility of a decrease in supplemental funding, which may impact future performance. Lastly, the Gulfstream division has encountered difficulties in delivering new aircraft products, which has implications for profit margins.
Goldman Sachs' adjusted price target of $245 reflects a significant decrease from the previous target of $283, signaling a bearish outlook for General Dynamics' stock performance. The analyst's comments underscore concerns about the company's ability to sustain its growth and profitability across its diverse portfolio in the face of industry and market challenges.
However, the company has maintained strong fundamentals with 11.07% revenue growth and a P/E ratio of 19.98x. For comprehensive analysis including Fair Value estimates and detailed financial health scores, investors can access the full Pro Research Report on InvestingPro.
In other recent news, General Dynamics Corp. has seen considerable activity across various sectors. Wolfe Research downgraded the company's stock rating due to margin pressures, leading to a cut in 2025/26 estimates. Concurrently, Deutsche Bank (ETR:DBKGn) maintained their Hold rating on General Dynamics, adjusting the price target to $303 due to weak Gulfstream deliveries.
Jefferies also lowered its price target for General Dynamics to $345, attributing this to underperformance in the Aerospace sector and revised Marine margins. Meanwhile, Bernstein SocGen Group reduced its price target to $331 following the company's third-quarter results, which did not meet consensus estimates. On the other hand, RBC Capital Markets raised its price target to $330, influenced by the company's robust 10% growth in total revenue for the quarter.
General Dynamics reported a significant 10.4% revenue increase, primarily driven by its Aerospace and Marine divisions. Despite a shortfall in G700 aircraft deliveries, General Dynamics expects a strong fourth quarter.
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