General Dynamics' fourth quarter results saw sales and profit exceed Wall Street expectations, yet the market responded negatively, reflecting concern over several operational headwinds. Management cited robust demand across its portfolio, particularly in Aerospace and Combat Systems, but also acknowledged margin pressures from tariffs, supply chain bottlenecks, and product mix. CEO Phebe Novakovic specifically pointed to the “imposition of tariffs” and “higher overhead” in Aerospace as key factors impacting profit performance despite strong order activity and delivery increases.
Is now the time to buy GD? Find out in our full research report (it’s free for active Edge members).
General Dynamics (GD) Q4 CY2025 Highlights:
- Revenue: $14.38 billion vs analyst estimates of $13.82 billion (7.8% year-on-year growth, 4.1% beat)
- Adjusted EPS: $4.17 vs analyst estimates of $4.12 (1.3% beat)
- Adjusted EBITDA: $1.70 billion vs analyst estimates of $1.68 billion (11.9% margin, 1.5% beat)
- Operating Margin: 10.1%, in line with the same quarter last year
- Backlog: $118 billion at quarter end, up 30.3% year on year
- Market Capitalization: $95.93 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From General Dynamics’s Q4 Earnings Call
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Seth Seifman (JPMorgan) asked about Aerospace margin recovery post-product transition. President Danny Deep said margins should improve with better pricing and efficiency, but cited tariffs and supply chain timing as ongoing headwinds.
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Doug Harned (Bernstein) questioned progress toward Navy throughput goals in Marine. CEO Phebe Novakovic said productivity is rising but the supply chain remains the main constraint, with further government investment needed in critical suppliers.
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Scott Deuschle (Deutsche Bank) asked about achieving 100% free cash flow conversion despite higher capital expenditures. CFO Kim Kuryea said strong operating performance should offset investment, but noted the Navy is not currently providing working capital support.
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Sheila Kahyaoglu (Jefferies) inquired about the drivers of Gulfstream demand. Novakovic pointed to new product introductions and global economic strength, while cautioning that delivery growth will be limited by completion capacity and the need to absorb recent expansion.
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Andre Madrid (BTIG) focused on international demand and backlog conversion in Combat Systems. Deep said European Land Systems will see rapid growth, but emphasized that revenue impact will take time as programs move from engineering to production.
Catalysts in Upcoming Quarters
In the quarters ahead, the StockStory team will monitor (1) the pace at which General Dynamics converts its record defense backlog into revenue, (2) progress on margin expansion in Aerospace as supply chain and tariff headwinds are addressed, and (3) the impact of elevated capital expenditures, particularly in Marine Systems, on both productivity and free cash flow. Additional scrutiny will be given to international contract execution and the timing of major U.S. Navy shipbuilding awards.
General Dynamics currently trades at $356.00, down from $366.62 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free).
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