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On Monday, Jefferies adjusted its price target for General Dynamics Corp. (NYSE:GD) shares, lowering it to $270 from the previous $280, while maintaining a Hold rating on the stock. Currently trading at $246.11, near its 52-week low of $239.87, InvestingPro analysis suggests the stock is undervalued based on its Fair Value model. The revision follows a detailed examination of General Dynamics’ annual report, which revealed several key financial shifts within the company’s operations.
The analysis by Jefferies pointed out a contraction in Aero Manufacturing margins by 70 basis points to 12.0%, attributed to increased costs associated with G700 deliveries. Despite these challenges, the company maintains strong fundamentals with a 12.88% revenue growth over the last twelve months and a P/E ratio of 17.81. Additionally, the aerospace backlog saw a 4% decline with a book-to-bill (B2B) ratio of 1.0X, and 54% of the 2024 orders, a slight decrease from 56% in the previous year, coming from U.S. customers.
The defense segment of General Dynamics also experienced a backlog reduction of 3%, driven by a lower B2B ratio of 0.9X due to long-term Marine contracts. A notable financial adjustment was recorded in the fourth quarter of 2024, with a negative profit adjustment of $123 million for the Virginia-class Block IV submarines.
Furthermore, the report highlighted the company’s free cash flow (FCF), which included a $1.2 billion use of inventory in 2024. This was coupled with a relatively modest inflow of $343 million from customer advances and deposits. These figures provide a snapshot of the company’s financial health and cash management strategies over the past year. As a prominent player in the Aerospace & Defense industry with a 47-year history of consistent dividend payments, General Dynamics demonstrates remarkable stability with a low beta of 0.61. For deeper insights into General Dynamics’ financial health and growth prospects, access the comprehensive Pro Research Report available on InvestingPro.
In other recent news, General Dynamics Corporation reported its financial results for the fourth quarter of 2024, revealing an earnings per share (EPS) of $4.15, which was slightly below the forecast of $4.30. However, the company’s revenue reached $13.34 billion, surpassing expectations of $13.22 billion. Citi analysts adjusted their outlook on General Dynamics, reducing the price target on the company’s shares from $360.00 to $335.00, while maintaining a Buy rating. Bernstein analysts also revised their outlook, lowering the price target to $290 from $298, maintaining a Market Perform rating. Despite these changes, General Dynamics’ fourth-quarter earnings exceeded expectations, with higher revenues in Marine, Combat Systems, and Technologies segments. The company faces challenges with supply chain disruptions, impacting Gulfstream jet deliveries, which totaled 136 aircraft, below the 150 units guided. Looking forward, General Dynamics forecasts a 5.5% increase in revenue for 2025, expecting to reach $50.3 billion, with an EPS projection of $14.80.
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