Critical Review: General Dynamics (NYSE:GD) versus MTU Aero Engines (OTCMKTS:MTUAY)

MTU Aero Engines (OTCMKTS:MTUAY) and General Dynamics (NYSE:GD) are both large-cap aerospace companies, but which is the superior investment? We will contrast the two companies based on the strength of their profitability, analyst recommendations, risk, earnings, valuation, institutional ownership and dividends.

Institutional & Insider Ownership

0.0% of MTU Aero Engines shares are held by institutional investors. Comparatively, 86.1% of General Dynamics shares are held by institutional investors. 1.4% of General Dynamics shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Volatility & Risk

MTU Aero Engines has a beta of 1.02, indicating that its stock price is 2% more volatile than the S&P 500. Comparatively, General Dynamics has a beta of 0.34, indicating that its stock price is 66% less volatile than the S&P 500.

Dividends

MTU Aero Engines pays an annual dividend of $1.49 per share and has a dividend yield of 0.8%. General Dynamics pays an annual dividend of $6.36 per share and has a dividend yield of 1.9%. MTU Aero Engines pays out 13.9% of its earnings in the form of a dividend. General Dynamics pays out 40.0% 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.

Profitability

This table compares MTU Aero Engines and General Dynamics’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
MTU Aero Engines	11.28%	24.07%	8.14%
General Dynamics	8.07%	17.41%	7.52%

Analyst Recommendations

This is a summary of current recommendations and price targets for MTU Aero Engines and General Dynamics, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
MTU Aero Engines	2	4	3	1	2.30
General Dynamics	1	7	11	2	2.67

General Dynamics has a consensus price target of $387.40, indicating a potential upside of 13.20%. Given General Dynamics’ stronger consensus rating and higher possible upside, analysts clearly believe General Dynamics is more favorable than MTU Aero Engines.

Valuation & Earnings

This table compares MTU Aero Engines and General Dynamics”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
MTU Aero Engines	$9.91 billion	1.93	$1.15 billion	$10.69	16.62
General Dynamics	$52.55 billion	1.76	$4.21 billion	$15.89	21.54

General Dynamics has higher revenue and earnings than MTU Aero Engines. MTU Aero Engines is trading at a lower price-to-earnings ratio than General Dynamics, indicating that it is currently the more affordable of the two stocks.

Summary

General Dynamics beats MTU Aero Engines on 12 of the 18 factors compared between the two stocks.

About MTU Aero Engines

MTU Aero Engines AG, together with its subsidiaries, engages in the development, manufacture, marketing, and maintenance of commercial and military aircraft engines, and aero-derivative industrial gas turbines in Germany, other European countries, North America, Asia, and internationally. It operates through two segments: Original Equipment Manufacturing (OEM Business); and Maintenance, Repair, and Overhaul (MRO Business). The company offers commercial aircraft engines for wide body jets, narrow body and regional jets, business jets, and turboprops; military aircraft engines for fighter jets, helicopters, and transporters; and industrial gas turbines. It also maintains, repairs, and overhauls commercial and military engines; and manufactures and markets various spare parts. The company was formerly known as MTU Aero Engines Holding AG and changed its name to MTU Aero Engines AG in May 2013. MTU Aero Engines AG was founded in 1913 and is headquartered in Munich, Germany.

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.