On Tuesday, Baird analysts announced a downgrade of General Dynamics Corp. (NYSE: NYSE:GD) stock rating from Outperform to Neutral, accompanied by a reduction in the price target from $345.00 to $283.00.
The defense giant, currently trading at $263.67 with a market capitalization of $72.38 billion, faces several challenges including poor execution and delivery delays. According to InvestingPro analysis, the stock is currently trading near its 52-week low, suggesting potential value for long-term investors despite current headwinds.
The analysts cited specific concerns that influenced their decision, highlighting issues such as the G700 aircraft delivery headwinds and delays in Naval shipyards. These setbacks have led to a significant reduction in the expected number of G700 aircraft deliveries for the fourth quarter of 2024, with only 11 aircraft delivered against the guidance of 42 for the entire year.
Despite these challenges, InvestingPro data shows the company maintains a GOOD financial health score, with strong revenue growth of 11.07% in the last twelve months.
The downgrade also reflects the potential volatility associated with General Dynamics Information Technology (GDIT) Services' exposure to DOGE headline risk. This aspect of the business is seen as a contributing factor to the anticipated fluctuations in the company's stock performance.
Baird has adjusted its earnings per share (EPS) estimates for General Dynamics for the years 2024 through 2026, taking into account the recent challenges and performance issues. Despite the stock's decline of 17% since November 12, 2024, Baird anticipates continued volatility for the defense contractor, particularly in relation to its Gulfstream aerospace division and the aforementioned DOGE-related risks.
In their commentary, Baird analysts stated, "We are downgrading the GD stock to Neutral and lowering our price target to $283, tied to ongoing poor execution, G700 delivery headwinds, Naval shipyard delays, and DOGE headline risk tied to GDIT Services exposure." They also noted the discrepancy between the company's guidance and the outcomes of their proprietary checks, which revealed a shortfall in G700 deliveries.
The broader analyst community maintains mixed views, with targets ranging from $245 to $354. For deeper insights into General Dynamics' valuation and growth prospects, investors can access comprehensive analysis through InvestingPro's detailed research reports, which cover over 1,400 US stocks.
In other recent news, General Dynamics has seen a series of adjustments from various analysts. Bernstein maintained a Market Perform rating on the company's stock but reduced the price target from $331.00 to $298.00. The revision followed updated financial projections for General Dynamics, anticipating fewer deliveries of the G700 aircraft in 2024 but a brighter revenue outlook for the Combat Systems segment.
Additionally, Vertical Research Partners downgraded General Dynamics' stock rating from 'Buy' to 'Hold', citing challenges in the Marine, Aerospace, and Technologies sectors. Similarly, RBC Capital Markets downgraded the company's stock from Outperform to Sector Perform due to concerns over the slower than expected delivery of Gulfstream jets.
In a positive development, the company stands to benefit from a $5.7 billion boost in Navy shipbuilding funding, as highlighted by TD Cowen analyst Roman Schweizer. This funding is expected to cover additional non-executive labor costs through 2029 for Virginia-class submarines and the Columbia-class submarine program.
Furthermore, General Dynamics has extended its executive consulting agreement with former Executive Vice President of Combat Systems, Mark C. Roualet, allowing the company to continue benefiting from his expertise.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.