Financial media took a generally downbeat view of General Dynamics'
True, the company failed to match the superb performance of shipbuilding rival Northrop Grumman
More importantly, General D gave investors a cause to hope that last quarter's weakness will give way to better times ahead. Funded backlog rose 3% year over year in Q1, nearing $47.4 billion. And at the rate this company eats revenue, total backlog alone would keep General Dynamics in business for another two years at least, even if it didn't sign a single new contract.
And by one measure at least, business actually improved. Free cash flow for the quarter, while seasonally weak, still topped $150 million. That's more than twice the $73 million the company generated in last year's Q1. The General has now amassed a trailing 12-month total of more than $2.5 billion in free cash flow, 5% beyond what its GAAP-calculated "earnings" suggest. In other words, General Dynamics did just fine last quarter. It wasn't a blowout success like the one warbot-maker iRobot
What ranks above "general"?
Unfortunately, after gaining 44% over the past 12 months, and trouncing the S&P's performance, I think the General is due for some R&R. At today's price, the stock commands a 12.6-times earnings multiple, and 12 times free cash flow. That's not a horrible valuation by any means. But it looks only middling-good based on consensus estimates of 7.8% long-term growth, and its healthy 2.2% dividend.
"Just fine" performance isn't no longer good enough to justify reupping on General Dynamics today. Not when you've got Raytheon