Why General Dynamics (GD) Could Reach $118

Story updated at 10 a.m. to reflect market activity.

NEW YORK (TheStreet) -- Shares of General Dynamics (GD) could reach as high as $118 according to UBS.

General Dynamics gained 0.4% to $107.19 in morning trading Wednesday.

The bank raised its price target for the aerospace company to $118 from $108 while maintaining its "buy" rating for the stock. The raised price target and EPS estimates is largely thanks to raised estimates in Saudi.

Analysts David E. Strauss, Darryl Genovesi, and Matthew Akers wrote, "We have raised our EPS estimates following GD's Saudi announcement on Friday. Our revised estimates now reflect a smaller decline at Combat, although at 7% still worse than GD guidance for 4-4.5% decline. Our revised estimates also incorporate a higher level for share repurchase than previously assumed."

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

"We rate GENERAL DYNAMICS CORP (GD) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, attractive valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins."

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

  • Powered by its strong earnings growth of 128.99% and other important driving factors, this stock has surged by 56.90% over the past year, outperforming the rise in the S&P 500 Index during the same period. 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 reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, GENERAL DYNAMICS CORP turned its bottom line around by earning $7.03 versus -$1.03 in the prior year. This year, the market expects an improvement in earnings ($7.15 versus $7.03).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Aerospace & Defense industry. The net income increased by 123.2% when compared to the same quarter one year prior, rising from -$2,130.00 million to $495.00 million.
  • Net operating cash flow has significantly increased by 98.97% to $1,552.00 million when compared to the same quarter last year. In addition, GENERAL DYNAMICS CORP has also vastly surpassed the industry average cash flow growth rate of 2.36%.

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