Shares of General Dynamics Corporation (NYSE: GD) jumped 10.9% to $347.72 in afternoon trading Wednesday after the defense contractor reported stronger-than-expected first-quarter earnings and revenue, prompting an upward revision to its 2026 profit outlook. The company now expects full-year earnings per share in the range of $16.45 to $16.55, up from its prior guidance of $16.10 to $16.20.
Strong Quarterly Results
For the quarter ended April 5, General Dynamics reported operating earnings of $1.4 billion, or $4.10 per diluted share, on revenue of $13.5 billion. Revenue rose 10.3% year over year, while both operating profit and diluted EPS increased 12%. The company ended the quarter with $3.7 billion in cash and equivalents.
Orders reached $26.6 billion, yielding a book-to-bill ratio of 2-to-1, meaning orders were roughly double the quarter's revenue. The backlog swelled to $130.8 billion, and including options and other potential contracts, the estimated contract value hit $188.4 billion.
Segment Performance
The standout performer was Marine Systems, where revenue surged 21% to $4.34 billion, driven by Virginia- and Columbia-class submarine programs. Aerospace revenue rose 8% to $3.28 billion, supported by a 15% operating margin, while Combat Systems and Technologies posted gains of 5% and 4%, respectively.
President Danny Deep highlighted that Gulfstream delivered 38 jets in the first quarter, a record for the period. Aerospace operating earnings reached $493 million, benefiting from higher deliveries, increased services revenue, and improved margins.
Cash Flow and Capital Allocation
Operating cash flow totaled $2.2 billion, with free cash flow just under $2 billion after capital expenditures. Chief Financial Officer Kim Kuryea noted that business units exceeded their internal cash-flow targets. However, capital spending is expected to rise over the year as the company invests in its shipyards.
During the quarter, General Dynamics paid about $405 million in dividends and spent close to $200 million on stock buybacks, mostly to offset dilution. Buyback activity remains subdued due to the political climate, according to Deep.
Risks and Outlook
Deep cautioned that late in the quarter, aerospace order activity was affected by the Middle East conflict. If tensions persist, the company may see a small impact on Gulfstream G280 supply and labor issues. Additionally, single-source suppliers continue to challenge the Marine Systems supply chain.
The upgraded guidance reflects momentum across Aerospace and Marine Systems, as well as a lift from Technologies. Deep described the quarter as "very powerful," emphasizing that the results were not solely driven by Gulfstream but by broad-based strength. The market responded positively to the trifecta of stronger earnings, robust order flow, and cash that exceeded expectations.
