General Dynamics (GD) Earnings Preview: Can the Defense Stock Maintain its Momentum?

As General Dynamics Corporation (GD) approaches its third-quarter earnings release tomorrow, markets are keenly watching to see if the defense and aerospace giant can sustain its impressive financial performance. The stock is currently up 4.83% in the last month, trading at almost $340.

Analysts estimate an earnings per share (EPS) of $3.71 for the quarter ending September 2025, an 10.75% increase from the same quarter last year. This anticipated growth is fueled by robust demand across GD's diverse segments, particularly in defense and aerospace.

General Dynamics has shown a strong financial performance in recent quarters, driven by demand in its defense and aerospace segments. In Q2 2025, GD reported an EPS of $3.74, exceeding both the previous year's $3.26 and analyst estimates of $3.55. Revenue increased by 8.9% year-over-year to $13.04 billion, exceeding the expected $12.39 billion. The Marine Systems segment led this growth with a 22% increase in revenue to $4.22 billion, driven by Columbia-class and Virginia-class submarine construction.

The Aerospace segment also performed well, with revenue rising 4.1% to $3.06 billion. The company secured over $28 billion in orders during the quarter, resulting in a record backlog of $103.7 billion, up 14% from the previous year. Following the earnings release, GD's stock price rose by 4.93% to $297.60.

In Q1 2025, General Dynamics reported an EPS of $3.66, exceeding analyst estimates of $3.46. Revenue grew by 13.9% year-over-year to $12.22 billion, surpassing expectations of $12 billion. The Aerospace segment was a significant contributor, with revenues increasing by 35.4% to $2.82 billion, driven by Gulfstream aircraft deliveries, particularly the G700 jets.

However, not all quarters have been perfect. Q4 2024 saw a 1.6% drop in share price despite a 14% increase in quarterly profit to $4.15 per share. This was attributed to concerns about potential defense budget cuts under the newly formed Department of Government Efficiency (DOGE).

While the prevailing sentiment leans towards optimism regarding General Dynamics' prospects, it's crucial to consider a potentially less rosy scenario. The defense sector, while seemingly insulated by geopolitical instability, is not immune to cyclical downturns. The current high demand, fueled by global conflicts, might be creating a false sense of security. A potential easing of tensions, or a shift in global strategic priorities, could lead to a significant reduction in defense spending.

Furthermore, GD's reliance on large government contracts makes it vulnerable to political shifts and policy changes. The aforementioned Department of Government Efficiency (DOGE), while perhaps not an immediate threat, signals a growing focus on cost-cutting within the defense sector. Could GD be forced to accept lower margins on future contracts to remain competitive?

The aerospace segment, reliant on discretionary spending, is also susceptible to economic downturns. While the G700 is currently a hot commodity, a global recession could dampen demand for luxury business jets, impacting GD's overall revenue.