Phebe Novakovic -- Barron's

Dow Jones06-22

The defense contractor's profit margins have suffered less than peers. Its stock has done better. By Al Root

Running a defense prime contractor is far from easy. There are constant fears about government spending and complaints about cost overruns. More recently, the industry has grappled with an insidious mix of higher-than-expected inflation and fixed-price contracts, which can ravage profit margins.

General Dynamics has weathered these challenges well under Phebe Novakovic, 66, a former case officer at the CIA, and been a steady performer. In the past two years, the company's profit margins have averaged about 10%, down less than two percentage points from prepandemic, pre-inflation levels in 2019. That's the smallest decline among defense-industry peers.

Meanwhile, the stock has outperformed peers over the past five years.

Novakovic "focuses on the business, and if the business does well, then the share price will look after itself," says Rob Stallard, an analyst at Vertical Research Partners.

Write to Al Root at allen.root@dowjones.com

To subscribe to Barron's, visit http://www.barrons.com/subscribe

(END) Dow Jones Newswires

June 21, 2024 21:30 ET (01:30 GMT)

Copyright (c) 2024 Dow Jones & Company, Inc.

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There are constant fears about government spending and complaints about cost overruns. More recently, the industry has grappled with an insidious mix of higher-than-expected inflation and fixed-price contracts, which can ravage profit margins. \n\n\n     General Dynamics has weathered these challenges well under Phebe Novakovic, 66, a former case officer at the CIA, and been a steady performer. In the past two years, the company's profit margins have averaged about 10%, down less than two percentage points from prepandemic, pre-inflation levels in 2019. 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