By Peet Serfontein & Khumbulani Kunene
General Dynamics Corporation is a global aerospace and defence company that specialises in high-end engineering and manufacturing to deliver state-of-the-art solutions to its customers. The company offers a broad portfolio of products and services ranging from business aviation, ship construction and repair, land combat vehicles, weapons systems and munitions, and technology products and services.
Technically, we see an increase in volumes (of shares traded) on the monthly volume heatmap which suggests a promising investment opportunity. This volume analysis shows consistent trading activity and greater volumes traded in the month of October. A notable rise in volumes in October 2024 further emphasises the improved interest in the stock, indicating steady demand from investors potentially due to confidence in the company's long-term prospects.
The price is in a markup phase of the Wyckoff Price Cycle. This phase signifies a period where the price rises significantly after a period of accumulation. Therefore, we are seeing the price form higher highs and higher lows, reflective of upward momentum and a bullish tone.
According to forward calculations of the Relative Strength Index indicator, the stock will be overbought at ~$385, making our profit target realistic.
The stock remains above its 200-day simple moving average (SMA) of $287.43. This suggests that the longer-term trend is still positive, which is encouraging.
Fading downside momentum according to the MACD indicator, as well as the recent steep upwards trajectory of the on-balance volume (OBV) indicator supports a bullish stance.
Share Information
| Share Code | GD US |
|---|---|
| Industry | Capital Goods |
| Market Capital (USD) | 82.84 billion |
| One Year Total Return | 26.79% |
| Return Year-to-Date | 18.36% |
| Current Price (USD) | 301.27 |
| 52 Week High (USD) | 313.11 |
| 52 Week Low (USD) | 236.58 |
| Financial Year End | December |
| The price has made strong gains over the past 12 months and year-to-date. Additionally, the group saw good growth in the 3Q24, with diluted EPS climbing 10.2% to $3.35 and the operating margin expanding 10bps to 10.1% y/y. | |
Consensus expectations
(Bloomberg)
| FY23 | FY24E | FY25E | FY26E | |
|---|---|---|---|---|
| Headline Earnings per Share (USD) | 12.02 | 14.05 | 16.25 | 17.74 |
| Growth (%) | 16.87 | 15.64 | 9.18 | |
| Dividend Per Share (USD) | 5.28 | 5.58 | 5.92 | 6.28 |
| Growth (%) | 5.70 | 6.00 | 6.20 | |
| Forward PE (times) | 21.45 | 18.55 | 16.99 | |
| Forward Dividend Yield (%) | 1.85 | 1.96 | 2.09 | |
| In light of positive top-line numbers in the previous quarter, earnings are expected to see good growth in the medium term as demand across the portfolio remained strong in the current environment. | ||||
Buy/Sell Rationale
Technical Analysis:
Fundamental view:
| Share Name and Position | AVY US - Exit the trade (Close the position) |
ABSI US - Buy (Continue to hold) |
BALL US - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 212.51 | 3.79 | 61.71 |
| Current | 204.96 | 4.11 | 64.62 |
| Movement | -3.6% | +8.4% | +4.7% |
| We suggest exiting the trade amid weakening technicals. |
A developing an inverted head and shoulders pattern remains of interest. Remains below its 200-day SMA. Subdue downside momentum is supportive.
Our profit target is $5.50, with a trailing stop-loss at $3.40. Exit the trade by 7 November 2024. |
A broadening bottom pattern remains attractive. Remains above its 200-day SMA, and upside momentum is supportive.
Our profit target is $69.00, with a trailing stop-loss at $61.60. Exit the trade by 7 February 2025. |
| Share Name and Position | APH US (Continue to hold) |
C US - Buy (Continue to hold) |
DIS US - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 66.85 | 61.71 | 94.05 |
| Current | 69.80 | 63.00 | 95.40 |
| Movement | +4.4% | +2.1% | +1.4% |
|
A developing bullish flag pattern remains of interest. Remains above its 200-day SMA. Fading downside momentum supports the strategy.
Our profit target is $76.00, with a trailing stop-loss at $66.00. Exit the trade by 29 February 2025. |
A price at the confluence of the 200-day, 200-week and 200-month simple moving averages (SMAs) remains of interest. Remains above its 200-day SMA and fading downside momentum is supportive.
Our profit target is $71.00 with a trailing stop-loss at $59.40. Exit the trade by 3 January 2025. |
The stock usually performs well between October to May. Remains below its 200-day SMA, however, upside price momentum supports the strategy.
Our profit target is $105.00, with a trailing stop-loss at $91.00. Exit the trade by 23 April 2025. |
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