Shares of General Dynamics Corporation (NYSE:GD) scaled a new 52-week high of $154.98 during yesterday’s trading session, before closing slightly lower at $154.63. The stock has delivered a one-year return of about 7.1%.
Over the past 52 weeks, General Dynamics’ shares have ranged from a low of $121.61 on Jan 20, 2016 to a high of $154.98 on Sep 6, 2016. The average volume of shares traded over the last three months is approximately 1.5 million.
What’s Driving the Stock Up?
General Dynamics’ top line is benefitting from a broad portfolio of products and services that help to keep the overall growth momentum steady. President Obama's fiscal 2017 budget proposal allocates $582.7 billion to the Pentagon, which includes $71.4 billion for Research & Development, and $8.1 billion for submarines. General Dynamics is one of the only two contractors in the world equipped to build nuclear-powered submarines.
The company’s diverse product portfolio and its widespread customer base enable it to generate revenues from different sources. In 2015, the U.S. government contributed to 57% of its revenues, U.S. commercial customers accounted for 17%, non-U.S. commercial customers comprised 13% and the remaining 13% were derived from non-U.S. defense customers.
Jet sales at the Gulfstream business continue to grow amid a volatile defense budget. Gulfstream is expected to contribute more significantly to General Dynamics’ earnings, going forward. Although the company’s Aerospace segment revenues decreased during the second quarter, its operating margin increased 90 basis points year over year to 20.3%, thanks to the cost saving initiatives and strong operating performance.
Diversifying its revenue stream helped the company counter the ongoing volatility in domestic defense spending.
Zacks Rank &Key Picks
General Dynamics currently has a Zacks Rank #2 (Buy).
Other favorably ranked stocks in the Aerospace sector include Leidos Holdings, Inc. (NYSE:LDOS) , Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) and Engility Holdings, Inc. (NYSE:EGL) . While Engility Holdings and Kratos Defense & Security Solutions sport a Zacks Rank #1 (Strong Buy), Leidos Holdings carries the same rank as General Dynamics.
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