Toward the end of the lightning round of the September 1 episode of Mad Money, a caller asked for Jim Cramer’s opinion of General Dynamics Corporation (NYSE:GD). Here’s what he had to say in response:
You’re not going to go wrong with General Dynamics, buying it here at 20 multiple. I think it’s fine… I wouldn’t put it all at once because remember, the budget deficit is going to have to be controlled at a certain point, and it’s going to include military. It is not my favorite in the group. My favorite in the group remains Lockheed Martin and Jim Taiclet.
Lockheed Martin Has the Edge Over General Dynamics
General Dynamics Corporation reported second-quarter revenue of $14.1 billion, up 8.1% year over year, compared with an 11% increase for Lockheed Martin Corporation (NYSE:LMT) to $20.1 billion. GD generated $1.9 billion in operating cash flow, while LMT produced $2.9 billion in free cash flow. The gap is wider in new orders. General Dynamics booked $20 billion during the quarter, lifting the backlog to $136.5 billion. Lockheed Martin won $65 billion of new orders, pushing the backlog to a record $230 billion. LMT therefore has nearly $94 billion more backlog, providing greater revenue visibility.
Lockheed also has stronger exposure to missile programs, one of the areas where defense demand is accelerating. Valuation further favors Lockheed. At the September 2 close, LMT traded at about 16.50x, compared with roughly 20.12x for GD. GD offers strong execution and substantial backlog, while LMT combines faster revenue growth, a larger backlog and a lower forward earnings multiple. That helps explain why Cramer considers General Dynamics a sound investment but continues to rank Lockheed Martin as his favorite.
Bear Case is Fiscal Spending and Execution
Cramer’s warning about the federal deficit is the central risk to both stocks. The CBO estimated in August that the U.S. federal budget deficit would reach $2.1 trillion in fiscal 2026, up $200 billion from its February projection. Any eventual effort to narrow the deficit could put limits on defense-budget growth, even if geopolitical demand remains high. Lockheed Martin Corporation has an additional earnings-comparison risk. Its second-quarter profit benefited from the absence of $1.6 billion of program losses recorded in the year-ago period. That makes the headline earnings rebound look stronger than what the year-over-year comparison alone would suggest.
For General Dynamics Corporation, the risk is less about a single earnings comparison and more about valuation. At roughly 22 times the midpoint of its 2026 EPS guidance, GD leaves less room for disappointment if defense spending slows or execution falls short.
Hedge Funds Favor LMT Over GD
Insider Monkey’s tracking of more than 1,000 hedge funds shows 62 funds held GD in Q2, unchanged from Q1, while 75 held LMT, down from 83 in Q1. The figures suggest steadier hedge fund positioning in General Dynamics, despite Lockheed’s larger backlog and stronger recent growth. Short interest, however, does not indicate a crowded bearish trade. For GD, short interest is at roughly 1%-1.1% of float and about 1% for LMT.
General Dynamics Corporation provides strong execution and a substantial backlog, but Lockheed Martin Corporation currently pairs faster growth and a larger backlog with a lower forward valuation. For investors choosing between the two, that makes LMT the stronger risk-reward proposition, while GD remains a credible defense holding at the right price.
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