Nearly every defense contractor you could shake a stick at (not that I'd advise it) has beaten its earnings estimates this week: Raytheon (NYSE: RTN)Northrop Grumman (NYSE: NOC), Boeing (NYSE: BA) -- and even the subject of today's column: General Dynamics (NYSE: GD).

Yes, the famously laconic General D reported first-quarter earnings that can be summed up in one word: "Charge!" Revenue advanced 11% to an even $7 billion. Operating margin improvement of 150 basis points (to 12.3%) lent supporting fire and opened the way for a veritable armored cavalry charge of profits: 30% better earnings from continuing operations, and profits per diluted share up 32% to $1.42.

What's more, there seems to be no stopping General D's advance. Backlog of work yet to be completed (and billed, and profited from) increased even faster than sales, up 14% to nearly $50 billion.

About the only chink I could find in General D's armor was free cash flow. Cash from operations dropped as the company paid off some of its current debts, and anted up more cash to Uncle Sam. (Seems only fair, though, considering that this self-same Uncle is the source of so much of General D's largesse.)

Meanwhile, capital expenditures rose. Result: At $346 million for the quarter, free cash flow contracted by 25% in comparison with last year's Q1.

Unfortunately, this looks to me like yet another "love the company, hate the stock" situation. By my calculations, General D has generated $2.3 billion in free cash flow over the past 12 months, slightly better than the $2.2 billion it has reported in net profit under GAAP. Either way, though, we're looking at a stock priced at about 16 times earnings, expected by most analysts to grow at no better than 10% per year over the next half decade.

To this Fool, buying General D at today's price looks about as Foolish as starting a two-front war: against profits that are too low, and a stock price that's too high. Don't make that mistake.

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