General Dynamics Corporation

General Dynamics had a strong quarter and managed an all-around beat with an improving order book position and a company-wide book-to-bill ratio of 0.9:1. The Combat Systems group saw particularly robust order activity with a book-to-bill ratio of 1.5x. The company had a backlog of $89.8 billion at the end of the quarter, which was down 1.4% from the end of the previous year but up 3% from the previous one. Optional and IDIQ contracts is included in GD’s overall projected contract value, which concluded the quarter at more than $128 billion. While Aerospace & Technologies continues to deliver strong cash performance, the Combat Systems group, in particular, produced exceptional free cash flow this quarter. In Technologies, revenues of $3.2 billion were up 2.5% yearly, slightly ahead of the company’s forecasts for the first quarter. Mission Systems’ steps to combat what appears to be the new normal in the supply chain are taking effect, giving General Dynamics confidence in its projection for the rest of the year. GDIT also reported its best quarterly revenue and earnings as it maintained its year-over-year growth trend. We give General Dynamics a ‘Hold’ rating with a revised target price.