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TheStreet Open House

Oppenheimer Upgrades General Dynamics (GD)

Stocks in this article: GD

NEW YORK (TheStreet) -- General Dynamics (GD) was upgraded to "outperform" from "perform," Oppenheimer said. The firm set a price target of $119.

General Dynamics rose 1.4% to $101.06 in early market trading Thursday.

"Despite mixed 4Q13 earnings, several factors suggest GD-which underperformed its peers by 20%+ over the last year-could be on the cusp of a rerating. 1) GD is preparing to significantly accelerate share repurchases, an area where it has lagged other primes. 2) Gulfstream, which has struggled with orders for several years, appeared to have hit an inflection point in 4Q, posting B:B above 1 for the first time since 2008. 3) While guidance for GD's army-levered segments is dreadful for 2014, they're likely close to the bottom," analyst Yair Reiner wrote in the report.

By market open, shares have spiked 1.4% to $101.

TheStreet Ratings team rates GENERAL DYNAMICS CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate GENERAL DYNAMICS CORP (GD) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share, largely solid financial position with reasonable debt levels by most measures and increase in net income. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 36.67% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, GD should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • GENERAL DYNAMICS CORP has improved earnings per share by 8.2% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, GENERAL DYNAMICS CORP swung to a loss, reporting -$1.03 versus $6.94 in the prior year. This year, the market expects an improvement in earnings ($7.02 versus -$1.03).
  • The current debt-to-equity ratio, 0.31, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that GD's debt-to-equity ratio is low, the quick ratio, which is currently 0.70, displays a potential problem in covering short-term cash needs.
  • GD, with its decline in revenue, underperformed when compared the industry average of 9.6%. Since the same quarter one year prior, revenues slightly dropped by 1.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The company, on the basis of net income growth from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Aerospace & Defense industry average. The net income increased by 8.5% when compared to the same quarter one year prior, going from $600.00 million to $651.00 million.

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