Shares of General Dynamics Corporation (GD - Free Report) scaled a new 52-week high of $168.60 on Nov 11, before closing slightly lower at $168.55. In fact, the company’s stock has surged about 22.7% so far this year, outperforming the S&P 500 peer group average of 5.9% over the same time frame.
Over the past 52 weeks, General Dynamics’ shares have ranged from a low of $121.61 on Jan 20, 2016 to a high of $168.60 on Nov 11, 2016. The average volume of shares traded over the last three months is approximately 1.3 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. Apart from Huntington Ingalls Industries, Inc. (HII - Free Report) , the company is the only contractor in the world equipped to build nuclear-powered submarines.
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. This indicates that the company is well positioned for long-term growth. Besides, multi-year stability in shipbuilding would likely lead to robust cash flows.
Jet sales at the Gulfstream business continue to grow despite the volatile defense budget, thereby driving General Dynamics’ Aerospace segment. Gulfstream is expected to contribute more significantly to the company’s earnings, going forward. Although Aerospace revenues were down during the third quarter, operating margin expanded a record 350 basis points year over year to 21.7%, thanks to the operating efficiency of the Gulfstream business.
Management also witnessed an increase in orders for Gulfstream aircraft in the quarter. In fact, per management, aircraft services’ operating earnings have been particularly strong in 2016 due to the favorable mix of work and improved labor efficiencies.
Moreover, General Dynamics’ diverse product portfolio and widespread customer base enable it to generate revenues from different sources. Diversifying its revenue stream has helped the company counter the ongoing volatility in the domestic defense spending.
Zacks Rank & Key Picks
General Dynamics currently has a Zacks Rank #3 (Hold).
A couple of better-ranked stocks in the Aerospace sector include Northrop Grumman Corporation (NOC - Free Report) and Engility Holdings, Inc. (EGL - Free Report) .
Northrop saw a 7.7% rise in its stock price in the last five trading sessions. On an average, the company has delivered a positive earnings surprise of 8.29% in the trailing four quarters. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Engility, another Zacks Rank #1 stock, saw an 8.6% upside in its stock price in the last trading session. On an average, the company has delivered a positive earnings surprise of 23.19% in the trailing four quarters.
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