Contrasting Embraer-Empresa Brasileira de Aeronautica (NYSE:EMBJ) and General Dynamics (NYSE:GD)

Embraer-Empresa Brasileira de Aeronautica (NYSE:EMBJ) and General Dynamics (NYSE:GD) are both large-cap aerospace companies, but which is the superior stock? We will contrast the two businesses based on the strength of their valuation, institutional ownership, risk, dividends, earnings, profitability and analyst recommendations.

Dividends

Embraer-Empresa Brasileira de Aeronautica pays an annual dividend of $1.07 per share and has a dividend yield of 1.6%. General Dynamics pays an annual dividend of $6.00 per share and has a dividend yield of 1.7%. Embraer-Empresa Brasileira de Aeronautica pays out 55.7% of its earnings in the form of a dividend. General Dynamics pays out 38.8% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. General Dynamics has raised its dividend for 34 consecutive years. General Dynamics is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional and Insider Ownership

34.7% of Embraer-Empresa Brasileira de Aeronautica shares are owned by institutional investors. Comparatively, 86.1% of General Dynamics shares are owned by institutional investors. 1.0% of Embraer-Empresa Brasileira de Aeronautica shares are owned by insiders. Comparatively, 1.5% of General Dynamics shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Analyst Recommendations

This is a summary of recent recommendations for Embraer-Empresa Brasileira de Aeronautica and General Dynamics, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Embraer-Empresa Brasileira de Aeronautica	1	1	6	1	2.78
General Dynamics	1	6	12	2	2.71

Embraer-Empresa Brasileira de Aeronautica presently has a consensus price target of $64.43, indicating a potential downside of 3.59%. General Dynamics has a consensus price target of $384.53, indicating a potential upside of 9.85%. Given General Dynamics’ higher possible upside, analysts clearly believe General Dynamics is more favorable than Embraer-Empresa Brasileira de Aeronautica.

Profitability

This table compares Embraer-Empresa Brasileira de Aeronautica and General Dynamics’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Embraer-Empresa Brasileira de Aeronautica	4.64%	7.45%	2.25%
General Dynamics	8.01%	17.57%	7.38%

Earnings & Valuation

This table compares Embraer-Empresa Brasileira de Aeronautica and General Dynamics”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Embraer-Empresa Brasileira de Aeronautica	$7.58 billion	1.59	$351.90 million	$1.92	34.81
General Dynamics	$52.55 billion	1.80	$4.21 billion	$15.45	22.66

General Dynamics has higher revenue and earnings than Embraer-Empresa Brasileira de Aeronautica. General Dynamics is trading at a lower price-to-earnings ratio than Embraer-Empresa Brasileira de Aeronautica, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

Embraer-Empresa Brasileira de Aeronautica has a beta of 1.61, indicating that its share price is 61% more volatile than the S&P 500. Comparatively, General Dynamics has a beta of 0.38, indicating that its share price is 62% less volatile than the S&P 500.

Summary

General Dynamics beats Embraer-Empresa Brasileira de Aeronautica on 15 of the 18 factors compared between the two stocks.

About Embraer-Empresa Brasileira de Aeronautica

Embraer S.A. designs, develops, manufactures, and sells aircraft and systems in North America, Latin America, the Asia Pacific, Brazil, Europe, and internationally. The company operates through Commercial Aviation; Defense & Security; Executive Aviation; Services & Support; and Other segments. The Commercial Aviation segment designs, develops, manufactures, and sells commercial jets, as well as leases aircraft. The Defense & Security segment engages in the research, development, production, modification, and support for military defense and security aircraft; and offers a range of products and integrated solutions that include radars, special space systems, and cyber security solutions, as well as information and communications systems comprising command, control, communications, computer, intelligence, surveillance, and reconnaissance systems. The Executive Aviation segment develops, produces, and sells executive jets. This segment also leases Phenom family executive jets in the entry jet and light jet categories; and Praetor 500 and Praetor 600, disruptive executive jets in the midsize and super midsize categories. The Service & Support segment provides after-service solutions and support services; maintenance, repair, and overhaul services for commercial, executive, and defense aircraft; and aircraft components and engines. This segment also supplies steel and composite aviation structures to various aircraft manufacturers. The Other segment engages in the supply of fuel systems, structural parts, and mechanical and hydraulic systems; and production of agricultural crop-spraying aircraft. The company was formerly known as Embraer-Empresa Brasileira de Aeronáutica S.A. and changed its name to Embraer S.A. in November 2010. Embraer S.A. was incorporated in 1969 and is headquartered in São Paulo, Brazil.

About General Dynamics

General Dynamics Corporation operates as an aerospace and defense company worldwide. It operates through four segments: Aerospace, Marine Systems, Combat Systems, and Technologies. The Aerospace segment produces and sells business jets; and offers aircraft maintenance and repair, management, aircraft-on-ground support and completion, charter, staffing, and fixed-base operator services. The Marine Systems segment designs and builds nuclear-powered submarines, surface combatants, and auxiliary ships for the United States Navy and Jones Act ships for commercial customers, as well as builds crude oil and product tankers, and container and cargo ships; provides maintenance, modernization, and lifecycle support services for navy ships; offers and program management, planning, engineering, and design support services for submarine construction programs. The Combat Systems segment manufactures land combat solutions, such as wheeled and tracked combat vehicles, Stryker wheeled combat vehicles, piranha vehicles, weapons systems, munitions, mobile bridge systems with payloads, tactical vehicles, main battle tanks, armored vehicles, and armaments; and offers modernization programs, engineering, support, and sustainment services. The Technologies segment provides information technology solutions and mission support services; mobile communication, computers, and command-and-control mission systems; intelligence, surveillance, and reconnaissance solutions to military, intelligence, and federal civilian customers; cloud computing, artificial intelligence; machine learning; big data analytics; development, security, and operations; and unmanned undersea vehicle manufacturing and assembly services. The company was founded in 1899 and is headquartered in Reston, Virginia.