General Dynamics Corporation (GD - Analyst Report) announced that its board of directors has officially approved the buyback of 10 million shares of the company's outstanding common stock on the open market. The company also declared its normal quarterly dividend of 51 cents, which it expects to pay on August 10, 2012, to shareholders of record at the close of business on July 6.
With no shares remaining under a prior authorization, the General Dynamics board had authorized to repurchase 10 million shares of common stock in October 2011. In the first quarter of 2012, the company had repurchased 1.4 million of outstanding shares on the open market at an average price of $72 per share. As of April 1, 2012, the company approximately had 8.6 million shares left for repurchase with about 2% of total shares outstanding.
In March 2012, General Dynamics had increased its quarterly dividend by 8.5%, thus raising its quarterly dividend to 51 cents per share from the previous payout of 47 cents per share.
In this context, General Dynamics’ peer Lockheed Martin Corporation (LMT - Analyst Report) had received authorization in September 2011 to buy back up to an additional $2.5 billion shares under its share repurchase program. It had also increased its quarterly dividend from 75 cents per share to $1.00 per share.
General Dynamics has a good liquidity position to back up its share repurchase and dividend plans. Cash and cash equivalents as of March 31, 2012, were $2.6 billion versus $2.5 billion as of March 31, 2011. Net cash provided by operating activities during the quarter was $414 million compared with $328 million in the year-ago period.
In the first quarter of 2012, the company clocked pro forma earnings of $1.70 per share, above the year-ago figure of $1.64, driven by uninterrupted growth at the Aerospace segment, efficient execution of programs and its ability to make optimum use of opportunities. Going forward, we expect an improving business jet market, a stable business of U.S. military vehicles, and strong cash flow generation to act as key growth drivers of the company.
However, we expect the growth to be hindered by threat of budget cuts, steadily dropping order backlog, and risks related to the execution of key projects. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.
Based in Falls Church, Virginia, General Dynamics is a market leader in business aviation; land and expeditionary combat systems, armaments and munitions; shipbuilding and marine systems; and information systems and technologies.