On Thursday, Jefferies adjusted its stance on General Dynamics Corp. (NYSE: NYSE:GD), downgrading the stock from Buy to Hold and reducing the price target to $300 from $345. The decision reflects concerns over earnings and revenue projections, as well as margin pressures in certain divisions of the company. The new price target is set at a 17 times price-to-earnings (P/E) ratio, indicating a 20% discount to the S&P average.
The downgrade is partly attributed to lower-than-expected earnings per share (EPS) for 2025, which Jefferies estimates at $15.15, approximately 5% below the consensus of $16. This discrepancy stems from anticipated aerospace revenue, with projections of $12.2 billion, which is 10% lower than the consensus.
The forecast includes sales of 40 G700 aircraft, compared to the consensus of 48, and 10 G800s, aligning with consensus estimates. However, the expected margins are slightly lower, with a 14.5% margin compared to the consensus of 15%. The company's current trailing twelve-month revenue stands at $46.05 billion, with an 11.07% growth rate.
Another factor influencing the downgrade is the prolonged margin drag in the Marine segment. Jefferies predicts a 7.0% margin in 2025, which falls short of the long-term average of 8-9%. The report notes that each 50 basis point deviation from the expected margin equates to a $0.20 impact on EPS, due to challenges such as out-of-station work. InvestingPro data reveals the stock is currently in oversold territory, with 10+ additional exclusive insights available to subscribers.
Additionally, the firm points to the Technologies division's high exposure to civil markets—36% versus less than 30% for its peers—placing it at risk of downturns in the Department of Defense spending (DOGE).
This revised outlook by Jefferies reflects a cautious view on General Dynamics' financial performance over the next few years, particularly in the aerospace and marine sectors, as well as potential vulnerabilities in its civil technology business. The new price target of $300 represents a more conservative valuation for investors, taking into account the anticipated challenges the company may face.
In other recent news, General Dynamics Corp. faced a series of adjustments from various investment firms following its recent earnings and revenue results. Goldman Sachs downgraded the company's stock from Neutral to Sell, citing challenges across all business sectors. Wolfe Research also downgraded the stock due to margin pressures and cut its 2025/26 estimates. Meanwhile, Deutsche Bank (ETR:DBKGn) maintained their Hold rating on General Dynamics, adjusting the price target to $303 due to weak Gulfstream deliveries.
Jefferies lowered its price target for General Dynamics to $345, attributing this to underperformance in the Aerospace sector and revised Marine margins. Bernstein SocGen Group reduced its price target to $331 following the company's third-quarter results, which did not meet consensus estimates. On the other hand, RBC Capital Markets raised its price target to $330, influenced by the company's robust 10% growth in total revenue for the quarter.
These developments come after General Dynamics reported a significant 10.4% revenue increase, primarily driven by its Aerospace and Marine divisions. Despite a shortfall in G700 aircraft deliveries, General Dynamics expects a strong fourth quarter. These are the recent developments for General Dynamics Corp.
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