TSC Ratings' Updates: General Dynamics

TSC Ratings provides exclusive stock, ETF and mutual fund ratings and commentary based on award-winning, proprietary tools. Its "safety first" approach to investing aims to reduce risk while seeking solid outperformance on a total return basis.

The following ratings changes were generated on Wednesday, May 27.

We've upgraded Entergy(ETR Quote) from hold to buy, driven by its attractive valuation levels, considering its current price compared to earnings, book value and other measures. We feel these strengths outweigh the fact that the company has had generally poor debt management on most measures that we evaluated.

Earnings per share declined by 23.1% in the most recent quarter compared with the year-ago quarter, but we feel it is poised for EPS growth in the coming year. Revenue dropped by 2.6% since the year-ago quarter, and net income fell by 23.4%, from $313.8 million to $240.3 million.

Shares have plunged 38.8% over the past year, probably driven in part by the decline of similar magnitude in the overall market. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it is one of the factors that makes this stock an attractive investment.

We've upgraded General Dynamics(GD Quote) from hold to buy, driven by its revenue growth, increase in net income, attractive valuation levels, notable return on equity and growth in earnings per share. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Revenue rose by 18% since the same quarter last year, and EPS increased 8.4%, though we anticipate underperformance in the coming year relative to the company's two-year pattern of positive EPS growth. Net income rose 3.1%, from $572 million to $590 million. ROE also rose, a sign of strength within the company.