Stocks to watch today: CSCO, GOOGL, LB >>> READ MORE

4 Defense Stocks That Could Pay Off Big in 2014

With no sequestration, flat Pentagon spending doesn’t look so bad

      View All  

General Dynamics (GD)

defense-stocks-GD-stockGeneral Dynamics’ (GD) fourth-quarter earnings per share beat the street by a penny at $1.76 per share on Wednesday; revenue edged up to $8.1 billion over the consensus $7.99 billion. The company also improved operating margins in every unit but marine systems. GD stock emerged as perhaps the biggest winner in the defense bill as lawmakers spared the U.S. Navy’s Virginia Class Attack Submarine.

General Dynamics’ Electric Boat division and co-contractor Huntington-Ingalls Newport News Shipbuilding (HII) are building the next-generation subs, which cost $3.2 billion apiece, at a total program cost of $93 billion. Lawmakers also ponied up $90 million to buy more M1 Abrams tanks — even though the Army says it doesn’t want any more of them.

But the winning play for GD stock investors is the company’s profitable Gulfstream aircraft business, which CEO Phebe Novakovic said Wednesday is the “primary growth engine” for the company’s earnings and revenue.

GD stock trades at 13.7 times forward earnings and has a price-to-earnings-growth (PEG) ratio of 2, which suggests it’s overvalued. GD’s current dividend yield is 2.3%. Despite the high valuation and average yield, this is still one of the best defense stocks out there.

Article printed from InvestorPlace Media,

©2017 InvestorPlace Media, LLC