RBC Capital Markets analyst Ken Herbert cut the price forecast for General Dynamics Corporation GD to $280 from $290, while reiterating an Sector Perform rating.

On Wednesday, the company reported revenue growth of 14.3% year over year to $13.338 billion, beating the consensus of $12.77 billion and EPS of $4.15 (up 14% Y/Y), above the consensus of $4.10.

In its conference call, the company said it expects a 2025 effective tax rate of 17.5%. The CEO said Gulfstream deliveries will be around 150 aircraft in 2025.

Also, the company expects 2025 total revenue of $50.3 billion and company-wide EPS to be around $14.80.

The analyst writes that he remains optimistic about the 2025 Gulfstream outlook, however, muted free cash flow and limited margin expansion in defense, coupled with heightened uncertainty in the sector, remains a matter of concern.

In particular, Herbert recognized the execution challenges at Gulfstream but acknowledge the strong business jet demand, reflected in a 1x book-to-bill ratio for fourth-quarter 2024.

Following the company's revised 2025 guidance, the analyst now projects 150 deliveries in 2025 and 160 in 2026.

Additionally, aircraft services could offer upside potential with low double-digit growth, adds the analyst.

Apart from this, the analyst says that the submarine supply chain continues to face significant constraints, leading to persistent margin underperformance.

While revenue growth remains strong, Herbert remain cautious about the pace of margin improvement.

For 2026, the analyst expects overall defense portfolio margins to remain flat at approximately 9.5%, consistent with 2024 levels.

Also, the analyst believes that Trump 2.0 can pose greater risk for the GD defense portfolio outside of Marine.

Investors can gain exposure to the stock via Global X Funds Global X Defense Tech ETF SHLDand First Trust Exchange-Traded Fund First Trust Indxx Aerospace & Defense ETF MISL.

Price Action: GDS shares are up 1.54% at $255.31 at the last check Thursday.

Read Next:

• DeepSeek Jitters Shatter US Tech Stocks, Wipe Out $1.2 Trillion On Wall Street: Analyst Eyes Four Chinese Giants Set To Benefit

Photo via Shutterstock.