General Dynamics

Headquartered in Reston, Virginia, US, General Dynamics Corporation is a global aerospace and defence company founded in 1952 following the merger of several companies such as Electric Boat, Canadair, and Convair. These companies were important during World War II, but their business suffered greatly when the war ended. General Dynamics has an impressive product portfolio that consists of jets, rockets, missiles, tanks, warships, submarines, wheeled combat vehicles, and several other advanced military electronics. The company offers its products and services via four business groups: Aerospace, Marine Systems, Combat Systems, and Technologies. These business units have a great deal of autonomy, and this has allowed the company to maintain focus on efficient capital allocation and continuous growth.

A product of a merger from its very beginning, General Dynamics has maintained an active portfolio throughout its history. Some of the notable acquisitions that have defined the company’s journey include Bath Iron Works, NASSCO, Gulfstream Aerospace, General Motors Defence, Jet Aviation, and CSRA. General Dynamics boasts a lucrative and stable business model supported by the Federal Government and a growing core of non-government customers. Like other defence companies, government contracts constitute a large portion of the overall revenues of General Dynamics. But the company is also having success with its commercial aerospace business that is continually growing. Among its peers, General Dynamics is the most promising in terms of diversifying away from government spending. The company has a massive Research & Development budget, and its push for a new cluster of customers helps to protect the future of the company.

General Dynamics is listed on the New York Stock Exchange, where its stock trades under the ticker symbol GD. GD stock is categorised in the Industrials sector, under the Aerospace & Defence industry.

GD Stock History

General Dynamics had six stock splits in its history. The most recent one was a 2-for-1 implemented on March 27^th, 2006. GD is a classic defence stock that features steady growth. Its price shows stability and consistency.

At the turn of the millennium, the stock traded at circa $25. It steadily drifted upwards and printed a peak at around $90 by August 2008. The 2008 financial crisis then triggered a stock correction, which tumbled to lows of circa $40 by March 2009. A period of consolidation then followed before GD stock embarked on a long-term rally that drove GD stock to its all-time highs at circa $230 by March 2018. A price pullback then followed, but it was overextended by the effects of the 2020 Great Lockdown, and GD stock fell to around the $120 price area in March 2020. The stock then recovered and now firmly trades above the $200 mark as of November 2021.

General Dynamics’ reliable business and steady cash flows have allowed the company to guarantee consistent and sustainable dividends to its shareholders. The company has in recent years averaged an impressive dividend yield of over 2.4%.

How to Trade GD Stock

Here are some of the factors to consider when trading GD stock:

• Government Spending – The government is General Dynamics’ largest source of revenue and thus a big factor in the underlying business of the company. The United States is a major world power and largely follows the mantra that a ‘strong defence is a good defence’. But while this guarantees an overall upward trend in the military over time, there are occasional budgets cuts and boosts. A small cut in military spending is a significant headwind on the stock, whereas boosts usually trigger higher GD stock prices.

• Economic Conditions – The government is a willing buyer of defence products, but spending tends to slow down during tough economic conditions. However, defence companies generally perform better in tough economic conditions than their counterparts that rely on commercial customers. This means that defence stocks such as GD are vulnerable to underlying economic conditions. An overall strong economy will support higher GD stock prices, whereas a weak economy will likely weigh heavily on the stock.

• Competition – General Dynamics operates in an industry dominated by a small elite group of players. But within that small circle, competition is fierce and based on reputation, innovation, and new product rollouts, as well as customer relations and flexible financing options. Contract competition is also highly competitive. That is, investor sentiment can be influenced by whether a contract has been won or lost.
• Periodic Earnings Reports – The General Dynamics’ fiscal year runs in tandem with the calendar year, from January 1^st to December 31^st. The company releases quarterly, semi-annual and annual reports that update investors on their business health and performance. GD stock investors watch out for metrics such as net revenues, backlog order value, net cash, contracts, and dividend payouts. Solid numbers will generally inspire higher stock prices, whereas weak figures will likely drag the GD stock price lower.

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** Disclaimer –While due research has been undertaken to compile the above content, it remains an informational and educational piece only. None of the content provided constitutes any form of investment advice.