General Dynamics' (GD) reported "strong" Q2 results, with revenue, earnings before interest and taxes, and free cash flow all beating expectations, RBC Capital Markets said in a Wednesday note.

The standouts of the report were the company's Aerospace margins and Marine Systems growth, the analysts said.

Aerospace segment operating margins of 14.5% were up 130 basis points year-on-year, while Marine Systems growth was "a highlight," the analysts said.

The increase in 2026 guidance was largely in line with the consensus, with revenue guidance of $55.7 billion just ahead of the consensus estimate of $55.5 billion, RBC said.

The company's current valuation reflects much of the upside in its Gulfstream business but the analysts noted that General Dynamics faces incremental uncertainty in parts of its defense portfolio.

RBC retained a sector perform rating on the stock but increased its price target to $410 from $385.

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