General Dynamics (NYSE:GD | GD Price Prediction) and Lockheed Martin (NYSE:LMT) reported Q1 2026 results pulling the two defense giants in opposite directions. General Dynamics beat on submarines and Gulfstream jets. Lockheed leaned on a record backlog to explain a messy quarter marked by fresh program charges and a cash flow reversal.
Submarines Carry GD. Program Charges Weigh On Lockheed.
General Dynamics posted EPS of $4.10 on revenue of $13.48 billion, with Marine Systems growing 21.0% and operating earnings there up 26.4%. Gulfstream delivered 38 aircraft versus 36 a year earlier, and Aerospace orders jumped 63%. CEO Phebe Novakovic said the businesses delivered “strong operating results and excellent cash conversion.” Operating cash flow hit $2.155 billion, a swing from negative territory a year ago.
Lockheed told a different story. EPS of $6.44 missed consensus of $6.70, revenue rose just 0.3%, and free cash flow went negative $291 million. A $125 million unfavorable F-16 adjustment plus hits on C-130, CH-53K, and Seahawk compressed segment margins to 10.1% from 11.6%. That is the second painful quarter in a year, following $1.6 billion in charges in Q2 2025.
A Deep Marine Moat Versus a Concentrated Fighter Bet
General Dynamics compounds a two-submarines-per-year cadence with commercial jets and defense IT, giving it a diversified earnings base tied to both long-term government and commercial demand. Total estimated contract value climbed to $188.44 billion, and consolidated book-to-bill ran 2-to-1.
Lockheed’s backlog is bigger at $194 billion, but heavier in fixed-price aeronautics work where losses keep resurfacing. New framework agreements for Patriot, THAAD, and PrSM should eventually lift production rates 3-4x, according to Jim Taiclet, yet near-term earnings look wobbly.
| Lens | GD | LMT |
| Core Bet | Nuclear submarines + Gulfstream | F-35 and missile framework deals |
| Q1 Free Cash Flow | $1.952B | -$291M |
| Forward P/E | 21x | 17x |
The Next Test Is Execution
Watch whether Lockheed closes F-16 issues and stabilizes CH-53K without another reach-forward loss. Guidance calling for $6.5B to $6.8B in 2026 free cash flow assumes a sharp back-half recovery. For General Dynamics, signals are Gulfstream deliveries, further Virginia-class submarine funding tied to the FY2027 shipbuilding budget of $65.8 billion, and whether Technologies margins can stop drifting from 9.5%.
Why I Lean Toward General Dynamics on This Earnings Report
General Dynamics looks like the cleaner defense holding. Cash conversion at 192% of net earnings, four straight EPS beats, and a submarine franchise with visible funding give it real downside protection. Lockheed’s $194B backlog and geopolitical tailwinds could reward patient turnaround investors, and Jefferies’ $400 target on GD shows the Street is warming up. For a defensive compounder profile, General Dynamics screens cleaner. For investors focused on fixed-price program noise in a rerating story, Lockheed still has a case.
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