Last Update 06 Dec 25

GD: Marine And Defense Demand Will Drive Multi Year Upside Potential

Analysts have nudged their price target for General Dynamics higher, toward the upper end of the Street’s recent range around $380 to $400. This reflects confidence in marine-driven defense growth, emerging opportunities in combat and technology, and improved balance sheet strength.

Analyst Commentary

Bullish analysts highlight that the latest round of estimate revisions and target hikes reflects growing conviction in General Dynamics' multi-year growth algorithm rather than a one-off quarter. They point to defense budget visibility, international demand, and management's disciplined capital allocation as key supports for a higher valuation range.

On balance, Street commentary is skewed toward the upside, with multiple firms moving to or reiterating Buy-equivalent ratings and lifting targets into the high $300s to $400 range. However, some investors remain focused on execution across the portfolio and the sustainability of recent momentum.

Bullish Takeaways

Bullish analysts argue that marine-driven strength in Q3 demonstrates the durability of the shipbuilding backlog, supporting above-trend revenue growth and improved visibility into cash generation.
Upside potential is seen in Combat and Technology, where exposure to a more tech-forward defense posture and classified programs is viewed as underappreciated in current valuation multiples.
Several target increases into the $380 to $400 range are tied to higher earnings estimates and confidence that the company can sustain solid execution across segments.
Improving balance sheet capacity is seen as a strategic asset, giving the company more flexibility for buybacks, dividends, and selective M and A that can enhance total shareholder return.

Bearish Takeaways

Bearish analysts remain cautious that expectations for marine and combat growth could be vulnerable to program timing shifts or budget negotiations, which may pressure near term execution.
Some investors question whether the recent run in the stock already embeds much of the defense spending and international demand upside, limiting further multiple expansion.
There is ongoing concern around integration and delivery risk in technology programs, where execution missteps could weigh on margins and challenge the higher price target range.
A more volatile macro and rate backdrop could constrain valuation re rating, even if fundamentals remain solid, leaving less room for error versus raised Street estimates.

What's in the News

U.S. Defense Secretary ordered an urgent gathering of top military commanders at a Virginia Marine Corps base, underscoring heightened Pentagon focus on force readiness and strategy, with General Dynamics listed among key defense contractors likely to be central to planning priorities (Washington Post).
The Pentagon is pressing missile manufacturers, including General Dynamics, to double or quadruple production of high demand munitions amid concerns over a potential future conflict with China, signaling sustained demand for advanced weapons systems and supporting long term order visibility (Wall Street Journal).
Four Democratic senators sent letters to General Dynamics Information Technology and other Medicaid eligibility system contractors, raising concerns that technology errors and new work requirements could wrongly remove Americans from coverage, adding political and regulatory scrutiny to GD's civilian government services work (KFF Health News).
General Dynamics NASSCO secured a $1.7 billion award to build two additional John Lewis class fleet replenishment oilers, extending a multi ship U.S. Navy contract that reinforces the durability of the company’s marine backlog and long cycle revenue base (company announcement).
General Dynamics Electric Boat received a $642 million cost plus fixed fee contract modification to support Virginia class submarine production, expanding lead yard support and design efforts and highlighting Electric Boat’s central role in the Navy’s nuclear submarine programs (U.S. Department of War contract announcement).

Valuation Changes

Fair Value: Unchanged at approximately $381 per share, suggesting the intrinsic valuation remains stable despite market volatility.
Discount Rate: Risen slightly from about 7.68 percent to roughly 7.75 percent, reflecting a modest uptick in perceived risk or required return.
Revenue Growth: Effectively unchanged at around 3.76 percent, indicating a steady outlook for top line expansion.
Net Profit Margin: Stable at roughly 9.20 percent, signaling no material shift in expected long term profitability.
Future P/E: Increased marginally from about 24.17 times to 24.22 times, implying a slightly higher valuation multiple being applied to forward 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