General Dynamics Corporation GD announced that its board of directors has authorized the repurchase of an additional 10 million shares of the company’s issued and outstanding common stock in the open market.
In the third quarter of 2015, General Dynamics repurchased 7.2 million shares for $1.04 billion. This marks the second consecutive quarter in which the company repurchased more than 2% of its outstanding shares. Consequently, share count fell 4.8% year over year.
The company simultaneously announced a quarterly cash dividend of 69 cents per share, same as the amount paid in the previous quarter. This amount will be paid on Feb 5 to shareholders of record as of the close of business on Jan 15, 2016.
We remind investors that General Dynamics has not only reported better-than-expected third-quarter earnings but has also raised its 2015 profit guidance on higher defense orders and solid demand for its Gulfstream planes. Revenues increased 3.1% driven mainly by the Marine segment (up 14.7%) led by the Virginia-class submarine Block IV. The company’s revenues are derived from a broad portfolio of products and services that help to keep the overall growth momentum steady. It is one of the only two contractors in the world equipped to build nuclear-powered submarines.
General Dynamics retains a strong balance sheet. In the first nine months of 2015, the company’s cash flow from operating activities was around $2,170 million. Free cash flow from operations in the period was $652 million. Management keeps returning a substantial portion of its free cash flow to shareholders through share repurchases and incremental dividends.
Zacks Rank
General Dynamics currently has a Zacks Rank #2 (Buy). Other favorably placed stocks in the aerospace and defense sector are Leidos Holdings, Inc. LDOS, Boeing Company BA and TransDigm Group Incorporated TDG. While Leidos and TransDigm sport a Zacks Rank #1 (Strong Buy), Boeing carries the same rank as General Dynamics.
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