GD: Higher Defense Budget Hopes And Buyback Limits Will Shape Future Returns

Analysts have nudged their price targets for General Dynamics higher, supporting a fair value update to about $394.81 as they factor in modestly stronger revenue growth expectations, a slightly lower discount rate and refined P/E assumptions, even as they temper profit margin forecasts.

Analyst Commentary

Recent research updates on General Dynamics cluster around higher price targets and refreshed assumptions, giving you a sense of where analysts see risk and opportunity lining up for the next couple of years.

Bullish Takeaways

Bullish analysts have raised price targets into the high US$380s to just under US$400 as they refresh models, suggesting they see the current fair value as supported by their revised assumptions on earnings power and cash generation.
Several research notes cite updated estimates across the aerospace and defense group. For General Dynamics, this translates into higher implied valuation multiples relative to prior target levels, even as ratings stay more neutral in tone.
The sector context in some reports references expectations that sector momentum could carry into the first half of 2026. This supports analysts using firmer revenue and earnings frameworks when they calibrate fair value for General Dynamics.
Some bullish analysts frame 2026 as setting up positively for the group despite uncertainty. This helps explain why they are comfortable with higher targets while still flagging risks around execution and policy.

Bearish Takeaways

Bearish analysts highlight the potential impact of limits on share repurchases in 2026 and 2027, with General Dynamics modeled as the most affected among large defense peers. This could weigh on total shareholder return assumptions even if operating performance holds steady.
Scenario work that removes buybacks from models adds an extra layer of caution around capital deployment flexibility. This leads some to stick with more muted ratings such as Neutral or Market Perform despite higher targets.
Political and regulatory headlines, including executive orders tied to contract performance and capital return, are treated as sources of elevated uncertainty. This can cap valuation multiples in some models even as analysts incorporate supportive budget scenarios.
The presence of only modest rating stances alongside higher targets suggests that some analysts see current pricing as already reflecting a fair share of the medium term growth and policy optimism they are baking into their forecasts.

What's in the News

General Dynamics NASSCO secured a US$1.7 billion award for the construction of fleet replenishment oilers T AO 215 and T AO 216, under its existing multi-ship contract with the U.S. Navy for up to eight additional John Lewis class ships, T AO 214 through 221 (company announcement).

Valuation Changes

Fair Value: Updated from about US$393.01 to about US$394.81, a small upward move that reflects the latest model tweaks.
Discount Rate: Adjusted from roughly 7.71% to about 7.64%, a slight reduction that increases the present value of projected cash flows.
Revenue Growth: Revised from around 3.93% to about 4.28%, indicating a modestly stronger forward revenue outlook in the models.
Net Profit Margin: Trimmed from roughly 9.10% to about 8.82%, building in a bit more caution on future profitability.
Future P/E: Moved from about 25.10x to roughly 25.30x, a minor increase in the valuation multiple applied to expected earnings.

Record backlog driven by global defense spending and new contracts enhances revenue visibility, especially in Marine, Aerospace, and advanced military programs.
Accelerated investments in cyber defense, digital modernization, and operational efficiency are fueling growth and supporting margin expansion across critical business segments.
Ongoing operational, technology, contract, and financial risks could strain margins and earnings growth across General Dynamics' core defense, aerospace, and technology segments.

Catalysts

About General Dynamics

Operates as an aerospace and defense company worldwide.What are the underlying business or industry changes driving this perspective?

Robust multi-year order intake and record backlog-driven largely by increased global defense spending and rising geopolitical instability-provide strong visibility into future revenue growth across key segments, especially Marine and Aerospace.
Accelerating investment in secure communications, IT modernization, and cyber defense solutions is fueling growth in the Mission Systems and GDIT divisions, aligning with increased government and enterprise focus on digital transformation and cyber resilience, which should support margin and earnings expansion as these mix shifts take hold.
Expansion of the Electric Boat program and significant new contracts for advanced submarines-supported by higher U.S. Navy funding and industrial base investments-position the Marine Systems segment for sustained sales growth and realization of operating leverage, benefitting both top
and bottom-line results over the long term.
Strong demand for Gulfstream's new business jet models (G700 and G800) across multiple regions, coupled with improved delivery cadences and a long-term capacity to ramp up production, suggest potential for higher future revenue and gradual margin improvement as learning curves are traversed and product mix shifts towards higher-margin offerings.
The company's focused initiatives on operational excellence, supply chain stabilization, and leveraging digital tools throughout its production system are delivering early improvements in productivity and are likely to drive steady net margin and earnings momentum as scale advantages and efficiency gains continue to compound.

General Dynamics Earnings and Revenue Growth

General Dynamics Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming General Dynamics's revenue will grow by 3.6% annually over the next 3 years.
Analysts assume that profit margins will increase from 8.1% today to 9.1% in 3 years time.
Analysts expect earnings to reach $5.1 billion (and earnings per share of $19.46) by about September 2028, up from $4.1 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $4.5 billion.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 20.9x on those 2028 earnings, down from 21.1x today. This future PE is lower than the current PE for the US Aerospace & Defense industry at 34.4x.
Analysts expect the number of shares outstanding to decline by 2.16% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 7.88%, as per the Simply Wall St company report.

General Dynamics Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

General Dynamics' increasing investment and production in legacy platforms like Gulfstream G400/700/800 and Abrams tanks could expose the company to technology obsolescence risk or customer preference shifts toward more advanced/emerging defense and aerospace solutions, potentially leading to higher R&D/capex needs and margin compression.
Delays and quality issues in the defense supply chain, especially in the Marine segment (e.g., Electric Boat and NASSCO), present ongoing operational risk; while short-term workarounds have been found, sustained supply instability and episodic setbacks (such as floods/rework at NASSCO) could impair throughput, increase costs, and compress net margins.
The Technologies segment, despite strong investments in AI, cyber, and mission software, is susceptible to contract adjudication delays, cancellations, and inconsistent award activity; a slower pace of contract wins or protest challenges may create unpredictable revenue flows and impact earnings growth.
Aerospace services and MRO revenue/margins remain volatile, as demonstrated by recent softness in the service businesses and high sensitivity to quarterly mix and volume. Fluctuations in fleet utilization, new aircraft introductions, or changes in after-market demand could lead to unpredictable margin and profit contributions from this division.
Persistent high net debt ($7.2 billion) and rising interest expenses, in the context of no recent share repurchases and reliance on commercial paper, could reduce financial flexibility, increase vulnerability to changes in interest rates or credit markets, and ultimately weigh on net income and earnings per share.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $336.0 for General Dynamics based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $370.0, and the most bearish reporting a price target of just $280.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $55.8 billion, earnings will come to $5.1 billion, and it would be trading on a PE ratio of 20.9x, assuming you use a discount rate of 7.9%.
Given the current share price of $321.33, the analyst price target of $336.0 is 4.4% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Analysts Lift General Dynamics Price Target as Strong Orders Offset Portfolio Concerns