Al Root

After a tough day for defense investors, General Dynamics' solid earnings report qualifies as a relief.

The company reported first-quarter earnings per share of $3.66, up 27% year over year, from sales of $12.2 billion, up 14% year over year on Wednesday morning. Wall Street was looking for $3.50 and $12 billion, respectively.

"We continue to see steady growth and improvement in operating performance across the defense portfolio," said CEO Phebe Novakovic in a news release. "The Aerospace segment saw a significant increase in profitability, reflecting the manufacturing efficiencies associated with reaching higher levels of production on our new aircraft models."

Shares were up 0.5% in premarket trading at $276.20, while S&P 500 and Dow Jones Industrial Average futures were up 2.4% and 1.8%, respectively. The market was helped by comments from Treasury Secretary Scott Bessent that indicated the U.S. would seek to ease trade tensions with China.

It's a small move for General Dynamics stock, but that's OK considering what happened Tuesday. Northrop Grumman shares dropped almost 13% after the aerospace and defense company cut full-year financial guidance. It recognized a loss on early production of its stealth bomber. Meantime, stock in another rival, RTX, dropped almost 10% after it reported first-quarter numbers. Morgan Stanley analyst Kristine Liwag said tariff fears affected investor sentiment.

Elsewhere in the sector, Lockheed Martin stock rose 0.8% after its earnings report. That was a rebound for shares. Coming into the earnings report, Lockheed stock was off 16%, the worst performance among major U.S. defense contractors. Concerns about changing priorities at the Pentagon and the cost of F-35 jets have weighed on investor sentiment.

General Dynamics is a big defense player, but it makes business jets too. "After various issues impacted deliveries at the end of last year, General Dynamics's bizjet division saw 45% growth in the quarter thanks to 36 deliveries," wrote Vertical Research Partners analyst Rob Stallard on Wednesday.

He rates shares Hold and has a $288 price target for the stock. Jefferies analyst Sheila Kahyaoglu rate shares Hold and has a $280 price target for the stock.

Marine sales grew 8% thanks in part to submarines, wrote Kahyaoglu in a Wednesday report. Backlog, however, however dropped to $89 billion with orders at $10.2 billion coming in below sales.

Investors like it when backlog grows, but a solid earnings report is good too.

Coming into Wednesday trading, General Dynamics stock was down about 7% since the Nov. 5 U.S. presidential election.

Write to Al Root at allen.root@dowjones.com

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April 23, 2025 08:46 ET (12:46 GMT)

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