Wednesday, January 26, 2011

General Dynamics' (NYSE:GD) Aerospace Exposure Should Drive EPS Growth

General Dynamics Corp.'s (NYSE:GD) exposure to aerospace is an advantage their peers don't have, according to Barclays (NYSE:BCS), and should drive the EPS growth of the company going forward.

Barclays says, "GD's aerospace exposure provides a financial benefit other defense peers don't have and at best should drive significantly higher EPS growth (ex pension), and at worst offset significant declines in GD's defense EBIT (which we don't forecast). If GD shares stay at current levels we'd expect the unlocked value from Aero to grow unsustainably large, forcing multiple expansion. The hard part is getting the timing right, as catalysts are hard to define and improvements are for multiple years. That said, for those with patience, we think GD shares offer a very attractive risk/reward."

Barclays maintains an "Overweight" rating on General Dynamics Corp. (GD), which closed Tuesday at $74.17, up $1.43, or 1.97 percent. Barclays has a price target of $87 on GD.

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