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General Dynamics Corp. (GD) stock traded higher Friday after the aerospace and defense company reported better-than-expected third-quarter 2026 results and raised its full-year outlook.
The company reported diluted earnings of $4.49 per share, beating the Wall Street estimate of $4.13.
Revenue climbed 12.9% year over year to $14.566 billion, topping the $13.731 billion consensus estimate.
Net earnings rose 16.1% to $1.229 billion, while operating earnings increased 14.7% to $1.527 billion. Operating margin expanded 20 basis points to 10.5%.
Operating cash flow totaled $1.710 billion, representing 139% of net earnings. Free cash flow reached $1.229 billion.
General Dynamics ended the quarter with $4.388 billion in cash and equivalents and $7.016 billion in total debt.
Total backlog reached a record $220.339 billion, roughly double the year-ago level. Total estimated contract value climbed to $270.669 billion.
The record backlog marks a milestone for CEO Phebe Novakovic, who announced Friday that this was her final earnings call after 14 years leading General Dynamics.
“While I will remain as Executive Chair to work with Danny and his team, this is my last earnings call,” Novakovic said, as she prepares to hand over leadership to Danny Deep.
Aerospace revenue increased 9.3% to $3.536 billion, while operating earnings jumped 19.3% to $513 million. Operating margin improved to 14.5% from 13.3%.
Gulfstream delivered 40 aircraft, compared with 39 a year earlier. The Aerospace segment recorded a book-to-bill ratio of 1.4.
President Danny Deep said Gulfstream aims to deliver 200 aircraft in 2030, requiring production to exceed 200 aircraft in 2029.
Deep said the company already has the workforce, facilities and production capabilities to support that target. However, supplier capacity remains the primary constraint.
“To go beyond 200, we’ll have to invest in more facilities and equipment, and we’re prepared to do so if the demand dictates that,” Deep said.
Novakovic said customer interest remains strong across the U.S., Western Europe and Southeast Asia.
Middle Eastern buyers remain in the pipeline, although geopolitical uncertainty has slowed orders.
Deep added that fuel prices have had “no discernible impact” on demand.
Marine Systems revenue surged 21.1% to $4.960 billion, while operating earnings jumped 34.4% to $391 million. Operating margin improved to 7.9% from 7.1%.
The segment recorded a book-to-bill ratio of 17.5, supported by $42.1 billion in contracts for nine additional Block VI Virginia-class submarines and $29.5 billion for five additional Columbia-class submarines.
CFO Kim Correa said the 7.9% margin included a one-time cumulative catch-up adjustment tied to improved performance on the Virginia Block IV program.
Excluding that benefit, Marine Systems still outperformed the first half. Correa identified the mid-7% range as the baseline margin, with further improvement possible as production and operating efficiency increase.
Marine output and throughput climbed 30% year over year.
Electric Boat has added 6,000 shipbuilders and expects that figure to reach 8,000 by year-end. Management continues investing in capacity, automation, productivity and workforce training.
Meanwhile, Combat Systems revenue increased 6% to $2.386 billion, while Technologies revenue rose 10.8% to $3.684 billion.
General Dynamics raised its fiscal 2026 diluted earnings forecast to $17.20-$17.30 per share from $16.80-$16.90, exceeding the Wall Street estimate of $17.
The company also forecast full-year revenue of $56.5 billion-$56.8 billion, above the $55.940 billion consensus estimate.
Management expects an operating margin of approximately 10.5%.
GD Price Action: General Dynamics shares were up 1.41% at $376.06 at the time of publication on Friday, according to market data.
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