GD - Embedded Expectations Analysis - 2021 01 25
General Dynamics Corporation (GD:USA) currently trades below recent averages relative to UAFRS-based (Uniform) earnings, with a 21.4x Uniform P/E. At these levels, the market is pricing in bearish expectations for the firm, and management may be concerned about their ability to meet free cash flow targets, Combat and Mission Systems growth rates, and government contractsSpecifically, management may lack confidence in their ability to meet their free cash flow to net income target of 80%-85%, sustain improvements in IT operating earnings and margins, and maintain Combat Systems growth rates. Moreover, they may be concerned about the sustainability of Columbia-class ballistic missile submarines sales growth, the performance of their Mission Systems business segment in unmanned undersea vehicles, and their acquisition of Medico. In addition, they may lack confidence in their ability to continue getting government contract wins, ramp-up production in the Naval business, and maintain steady supply chain production performance
General Dynamics is an aerospace and defense company. The company has five operating segments: Aerospace, which provides a family of Gulfstream aircraft and services for business aircraft produced by Gulfstream and other original equipment manufacturers; Combat Systems, which provides combat vehicles, weapons systems and munitions; Information Technology, which provides information technology (IT) services, IT infrastructure modernization and professional services; Mission Systems, which provides mission-critical products and systems; and Marine Systems, which designs and builds nuclear-powered submarines, surface combatants, and auxiliary and combat-logistics ships.
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