Attractive performance prospects for the Gulfstream maker General Dynamics Corporation (GD) have prompted Zacks senior analyst Jon Kolb to upgrade the shares to a Buy. His latest report states:
'General Dynamics continues to benefit from strong defense outlays. Revenue growth, margin expansion, an underleveraged balance sheet, and cash generation are among the driving factors, and the business jet market for Gulfstream appears to have stabilized. Management also believes that there is ample near-term upside potential for the Combat Systems segment, which delivered significant earnings momentum in 2006, as well as a boost in earnings at the IS&T segment due to acquisitions.
'General Dynamics' improved performance during recent quarters is an indication of better times ahead. The company continues to benefit from increased spending on the modernization of the U.S. Armed Forces. Looking ahead, defense spending is likely to increase at a moderate rate.
'Looking ahead, the company should benefit from an incremental Army program funding from the anticipated $80 billion supplemental. Accordingly, we upgrade our recommendation on GD common stock to BUY with a six-month target price of $97.50. Price appreciation to our near-term valuation target, coupled with a secure $0.29 per share quarterly dividend which appears very sustainable and secure represents annualized total return potential of 23.6%.'
Read the full analyst report on GD.
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