General Dynamics (NYSE:GD) Q4 2025 Earnings call January 28, 2026 09:00 AM ET Speaker9Good morning, and welcome to the General Dynamics fourth quarter 2025 earnings conference call. All participants will be in a listen-only mode. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Please n ...

Core Insights - General Dynamics reported quarterly earnings of $4.17 per share, exceeding the Zacks Consensus Estimate of $4.11 per share, and showing a slight increase from $4.15 per share a year ago, resulting in an earnings surprise of +1.56% [1] - The company achieved revenues of $14.38 billion for the quarter ended December 2025, surpassing the Zacks Consensus Estimate by 4.21% and increasing from $13.34 billion year-over-year [2] - General Dynamics has consistently outperformed consensus EPS and revenue estimates over the last four quarters [2] Earnings Performance - The earnings surprise for the previous quarter was +4.02%, with actual earnings of $3.88 per share compared to an expected $3.73 per share [1] - The current consensus EPS estimate for the upcoming quarter is $3.80, with projected revenues of $12.53 billion, while the estimate for the current fiscal year is $17.19 on revenues of $54.31 billion [7] Stock Performance - General Dynamics shares have increased approximately 8.9% since the beginning of the year, outperforming the S&P 500's gain of 1.9% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Industry Outlook - The Aerospace - Defense industry, to which General Dynamics belongs, is currently ranked in the top 34% of over 250 Zacks industries, suggesting a favorable outlook [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

January 28, 2026 Forward-Looking Statements; Non-GAAP Measures This presentation contains forward-looking statements (FLS), including statements about the company's future operational and financial performance, which are based on management's expectations, estimates, projections and assumptions. Words such as "expects," "anticipates," "plans," "believes," "forecasts," "scheduled," "outlook," "estimates," "should" and variations of these words and similar expressions are intended to identify FLS. In making F ...

Financial Performance - Fourth-quarter net earnings were $1.1 billion, with diluted EPS of $4.17 on revenue of $14.4 billion, representing a 7.8% increase from the previous year[5]. - For the full year, net earnings reached $4.2 billion, up 11.3% from 2024, on revenue of $52.6 billion, which is a 10.1% increase[2]. - Operating earnings for the full year were $5.4 billion, an 11.7% increase from 2024[15]. - Net earnings for 2025 were $4,210 million, up from $3,782 million in 2024, representing an increase of 11.3%[26]. - Revenue for Q4 2025 was $3,788 million, slightly up from $3,743 million in Q4 2024[48]. - Total revenue for the twelve months of 2025 was $13,110 million, compared to $11,249 million in 2024[48]. Cash Flow and Liquidity - The company reported a cash flow from operating activities of $1.6 billion in the fourth quarter, equating to 137% of net earnings[4]. - The company ended 2025 with $2.3 billion in cash and equivalents, having reduced total debt by $749 million during the year[4]. - Cash and equivalents at the end of 2025 rose to $2,333 million, compared to $1,697 million at the end of 2024, marking a 37.5% increase[26]. - The company reported a free cash flow of $3,959 million for 2025, an increase from $3,196 million in 2024, which is a growth of 24%[30]. Capital Expenditures and Investments - Capital expenditures for the year totaled $1.2 billion, reflecting a 27% increase from 2024[5]. - Capital expenditures for 2025 were $1,161 million, up from $916 million in 2024, representing a 26.7% increase[26]. Debt and Equity - The debt-to-equity ratio improved to 31.3% in 2025 from 39.7% in 2024, indicating a stronger equity position[29]. - Return on invested capital (ROIC) improved to 14.2% in 2025 from 13.2% in 2024, indicating enhanced efficiency in capital utilization[30]. Backlog and Orders - The consolidated book-to-bill ratio was 1.6 for the quarter and 1.5 for the full year, with a backlog of $118 billion at year-end[6]. - Total backlog reached $118,046 million in the fourth quarter of 2025, compared to $90,597 million in the fourth quarter of 2024, reflecting a 30.3% increase[34]. - Aerospace orders reached $5,075 million in Q4 2025, up from $3,814 million in Q4 2024[48]. - The company reported a significant increase in total orders for the twelve months, rising to $15,492 million from $11,278 million in 2024[48]. Segment Performance - Revenue from the Aerospace segment for the year was $13.1 billion, a 16.5% increase from 2024[19]. - Marine Systems revenue increased by 16.6% to $16.7 billion for the year[19]. Asset Growth - Total assets increased to $57,249 million in 2025 from $55,880 million in 2024, reflecting a growth of 2.5%[23]. - The company’s retained earnings increased to $44,080 million in 2025 from $41,487 million in 2024, a rise of 6.3%[23]. - Book value per share increased to $94.76 in 2025 from $81.61 in 2024, reflecting a growth of 16%[29]. Aircraft Deliveries - Gulfstream delivered a total of 45 aircraft in Q4 2025, a decrease from 47 in Q4 2024[48]. - Large-cabin aircraft deliveries were 41 units in Q4 2025, compared to 42 units in Q4 2024[48]. - Mid-cabin aircraft deliveries totaled 4 units in Q4 2025, down from 5 units in Q4 2024[48]. - Total aircraft deliveries for the twelve months of 2025 were 158, an increase from 136 in 2024[48].

Core Insights - General Dynamics experienced a significant increase in fourth-quarter revenue, driven primarily by its marine-systems and combat-systems segments [1] Group 1 - The marine-systems segment contributed notably to the revenue growth in the fourth quarter [1] - The combat-systems segment also played a crucial role in boosting the overall revenue for the company [1]

Core Viewpoint - General Dynamics experienced an increase in fourth-quarter revenue, primarily attributed to growth in its combat and marine systems segments [1] Group 1: Revenue Growth - The company reported a rise in fourth-quarter revenue, indicating positive performance in its business segments [1] Group 2: Segment Performance - The growth in revenue was specifically driven by the combat and marine systems segments, highlighting the strength of these areas within the company's portfolio [1]

Core Insights - RTX Corporation is a key player in the aerospace and defense sector, with an upcoming quarterly earnings report expected to show an EPS of $1.46 and revenue of approximately $22.7 billion [1][6] Group 1: Financial Performance - Analysts predict a 5.2% year-over-year decrease in RTX's EPS, while revenues are expected to increase by 5.2% to $22.7 billion [4][6] - The consensus EPS estimate has been revised upward by 1.3% over the last 30 days, indicating potential positive investor sentiment [4][6] - RTX's stock has seen a 6% increase over the past month, outperforming both the Zacks S&P 500 composite and the Zacks Aerospace - Defense industry [5] Group 2: Market Positioning - The company has secured significant contracts, particularly with the FAA, enhancing its revenue visibility in the aerospace domain [2] - RTX's engagement in the commercial aerospace market provides diversification, contributing to stable revenue streams [3] - The company's extensive product portfolio positions it favorably within the current market dynamics, especially amid rising demand for sophisticated military systems due to global geopolitical tensions [2][3] Group 3: Valuation Metrics - RTX trades at a marginally lower price-to-book valuation compared to General Dynamics, with a P/E ratio of approximately 39.83 [3][5] - The company's debt-to-equity ratio stands at approximately 0.63, indicating a moderate level of debt relative to its equity [5]

Core Viewpoint - The CSG IPO reflects a continuing trend of strong performance in the European defense sector [1] Group 1 - The CSG IPO is part of a broader trend indicating robust growth and investor interest in European defense stocks [1]

Core Viewpoint - Wall Street anticipates a year-over-year decline in earnings for General Dynamics despite higher revenues, with a focus on how actual results compare to estimates impacting stock price [1][2]. Earnings Expectations - General Dynamics is expected to report quarterly earnings of $4.10 per share, reflecting a year-over-year decrease of 1.2%, while revenues are projected to be $13.73 billion, an increase of 2.9% from the previous year [3]. - The consensus EPS estimate has been revised 0.05% higher in the last 30 days, indicating a slight positive adjustment by analysts [4]. Earnings Surprise Prediction - The Zacks Earnings ESP model indicates that the Most Accurate Estimate for General Dynamics is lower than the consensus estimate, resulting in an Earnings ESP of -1.04%, suggesting a bearish outlook [12]. - The stock holds a Zacks Rank of 3, making it challenging to predict an earnings beat conclusively [12]. Historical Performance - In the last reported quarter, General Dynamics exceeded the expected earnings of $3.73 per share by delivering $3.88, resulting in a surprise of +4.02% [13]. - Over the past four quarters, the company has consistently beaten consensus EPS estimates [14]. Comparative Industry Analysis - Northrop Grumman, a competitor in the aerospace-defense industry, is expected to report earnings of $6.99 per share, a year-over-year increase of 9.4%, with revenues projected at $11.62 billion, up 8.7% [18][19]. - Northrop Grumman's consensus EPS estimate has been revised 0.1% higher, and it has an Earnings ESP of +0.54%, indicating a likelihood of beating the consensus estimate [19][20].

Industry Overview - The defense and aerospace industry is experiencing volatility due to President Trump's proposals, including limiting defense stock buybacks and capping executive pay, which are seen as negative but unlikely to become law [1] - A proposed increase in the Pentagon's budget to $1.5 trillion by 2027 represents a 66% increase over the current 2026 defense budget, indicating a priority for increased defense spending [1][2] Company Highlights Kratos Defense and Security Solutions Inc. - Kratos has emerged as a significant player in the defense sector, reaching a market cap of $20 billion, driven by innovations in unmanned systems [3] - The company has consistently generated over $300 million in sales for three consecutive quarters and has surpassed analysts' EPS projections [3] - Kratos' stock has received three price target increases in 2026, including a new high target of $134 from Stifel [3] RTX Corp. - RTX, formed from the merger of Raytheon and United Technologies, has a market cap of nearly $260 billion and generates over $80 billion in annual sales [8] - The company is trading at 31 times forward earnings with a dividend yield of 1.4%, and is expected to report record quarterly revenue of over $22.7 billion in its upcoming Q4 2025 earnings report [8] L3Harris Technologies Inc. - L3Harris received a $1 billion investment promise from the Department of Defense and plans to spin out its missile business into a separate entity [9] - The stock has increased over 16% since the start of January 2026, driven by solid fundamentals and a bullish MACD crossover [12] General Dynamics Corp. - General Dynamics, a $97 billion defense contractor, has a strong history of dividend payouts, raising them for 34 consecutive years with a yield of 1.66% [13] - The company has a favorable valuation at 24 times forward earnings and recently secured a $900 billion deal with the U.S. Navy [15] Northrop Grumman Corp. - Northrop Grumman is the fifth-largest U.S. contractor by defense spending and has recently broken out of a multi-month downtrend [17][20] - The stock has retaken the 50-day SMA, with the breakout confirmed on the MACD, indicating potential for further upside [20]