A Beat-and-Raise on a Record Backlog, But the Re-Rating Has Caught Up: Initiating General Dynamics at Hold

Results vs. Consensus

Q2 2025 Scorecard

GD reports a single GAAP diluted EPS and does not publish a separate non-GAAP EPS. Consensus EPS shown is the broad Street figure management cited on the call ($3.55); Zacks consensus was $3.59 (+4.2%). Operating-earnings and margin consensus are approximate Street composites.

Year-Over-Year Comparison

Quarter-Over-Quarter Comparison

Quality of Beat

• Revenue: High quality and broad. Three of four segments grew, led by Marine (+22.2%) on Columbia- and Virginia-class construction volume. Growth was organic, not acquisition-driven, and not flattered by FX (GD is predominantly USD-revenue). The only soft spot was Combat (-0.2%), where the Booker cancellation and lower U.S. combat-vehicle volume offset European strength.
• Margins: The 30bps of YoY operating-margin expansion is sustainable and mix-driven in the right direction: Aerospace margin jumped 230bps as the G700 came down its learning curve and the high-margin G650 made its final deliveries. The QoQ margin step-down (10.4% to 10.0%) is the expected give-back as Marine's lower-margin revenue grew into a larger share of the mix, plus a one-time unfavorable NASSCO estimate-at-completion (EAC) adjustment.
• EPS: Operationally clean. The 14.7% EPS growth outran the 12.9% operating-earnings growth thanks to a ~2.4% lower share count from prior-period buybacks, but the bulk of the beat was operating leverage, not below-the-line help. The 17.7% tax rate was in line with the ~17.5% full-year outlook, so there was no tax windfall flattering the number.

Segment Performance

Aerospace

Aerospace was the quarter's quality story. Revenue rose a modest 4.1% to $3.06B, but operating earnings jumped 26.3% to $403M as margin expanded 230bps to 13.2%. The driver was Gulfstream mix and learning-curve progress: 38 deliveries including 15 G700s (four more than a year ago, two more sequentially), partly offset by the final, high-margin G650 deliveries rolling off. Management reported that all G700 retrofit aircraft and all pre-engine-completion G700s have now been delivered, retiring two of the cost and schedule headwinds that dogged the program through 2024. Aerospace also booked a 1.3x book-to-bill even as deliveries lifted the denominator, the strongest first-half order intake since 2022.

"The G800 deliveries are about to commence and G700 delivery cadence and operating margin are both improving. Interestingly, the first 20 of the G800s will be the G650 owners. There is significant interest in this plane from Fortune 500 companies." — Phebe Novakovic, Chairman & CEO

Assessment: This is the segment that can re-rate the stock, and the setup is constructive: G700 maturing, G800 launching into a captive G650 replacement base, and a margin path to the high teens by 2027. The near-term caveat is that early G800s and remaining G700 flight-test aircraft are dilutive to margin in H2, so the inflection is a 2026-2027 event, not a Q3 one.

Marine Systems

Marine grew 22.2% to $4.22B, up 17.6% sequentially, on Columbia- and Virginia-class construction (roughly 60/40 Virginia/Columbia by volume) plus a modest DDG-51 increase. Operating earnings rose 18.8% to $291M, but margin was 6.9%, down 20bps YoY and lower sequentially on an unfavorable NASSCO EAC adjustment tied to a flood that idled one of two prime production lines. The headline was orders: backlog jumped $14.6B (+38%) to nearly $53B on two Block V Virginia-class boats, including investment funds for shipyard productivity, wage increases, and training that should compound throughput gains at Electric Boat.

"The margin improvement at the Marine Group, and particularly within the submarine industrial base, improves at Electric Boat when we get additional stabilization in that industrial base and in our supply chain. We are seeing productivity improvements in a number of key places." — Phebe Novakovic, Chairman & CEO

Assessment: Marine is the multi-decade growth engine and the clearest bull pillar, but it is structurally the lowest-margin segment, so its rising mix share is a drag on consolidated margin. The bull case requires the 6.9% margin to grind higher as the supply chain stabilizes; the bear case is that submarine margins stay stuck in the 7s while supply-chain quality escapes keep disrupting workflow. This is the single most important variable for the consolidated margin trajectory.

Combat Systems

Combat revenue was essentially flat (-0.2% to $2.28B) as European growth offset lower U.S. combat-vehicle volume following the Army's Booker program cancellation. Operating earnings still rose 3.5% to $324M on 50bps of margin expansion to 14.2%, the portfolio's highest-margin segment, a testament to operating discipline irrespective of the top line. European book-to-bill ran 1.5x in the first half, and the munitions business continues to expand artillery capacity (projectiles, load-assembly-and-pack, propellant) alongside the Army.

"Growth in the quarter in Europe was offset by lower volume in our U.S. combat vehicle business, driven largely by the cancellation of the Booker program... The book-to-bill in our European business was 1.5x in the first half." — Jason Aiken, EVP, Combat & Mission Systems

Assessment: Combat is a margin-resilient business with a clear new tailwind: European defense budgets are poised to accelerate, and GD's European land-systems footprint is positioned to capture it. The Booker cancellation is a contained, known headwind; the next-generation main battle tank opportunity is the offset management is investing ahead of.

Technologies

Technologies grew 5.5% to $3.48B with operating earnings up 3.8% to $332M; margin slipped 10bps to 9.6% as GDIT (IT services) grew faster than the higher-margin Mission Systems. GDIT navigated a slow first-half award environment, with customer adjudications down significantly versus a year ago, yet still booked six wins over $100M (one over $1B) for a roughly 1x first-half book-to-bill. Mission Systems, after years of transitioning off legacy low-margin programs, is inflecting back to growth with backlog up 15% and total potential contract value up 23% YoY.

"Mission Systems has been transitioning from legacy lower-margin programs to new franchises for several years... This is the final year of that transition, and so we're starting to see an inflection to growth." — Jason Aiken, EVP, Combat & Mission Systems

Assessment: Technologies is the steady, lower-beta contributor. The watch item is the pace of federal contract adjudications, which slowed under the administration transition; if award cadence normalizes in H2, the segment hits its guide, and Mission Systems' inflection adds a margin-mix tailwind over time.

Key KPIs

Key Topics & Management Commentary

Overall Management Tone: Confident and unusually expansive. The CEO devoted long stretches of prepared remarks to walking the Street through the "mosaic" of Aerospace margin drivers and to defending the multi-year framing rather than the quarter, the posture of a management team that believes the market under-appreciates the forward trajectory. Pushback in Q&A was narrow and concentrated on Aerospace margin timing and Marine's structurally low margin; management answered the former at length and the latter with a candid "those margins over time need to improve."

1. Aerospace Margin: The "Mosaic" and the Path to High Teens

The CEO pre-empted the most common analyst question, when Aerospace margin moves above 15%, with an extended explanation of why it is hard to forecast. Aircraft margin is mix-driven (G700 highest, G800 ultimately similar, then G600, G500, G280, with the sunset G650 a strong recent contributor), but more than $3.5B of Aerospace revenue is services (Gulfstream maintenance, special-mission, Jet Aviation MRO, completions, FBO, and management of 300+ aircraft), each with its own volume- and mix-driven margin.

"When it will move into the high teens, that is above 15%? The simple answer is maybe 2026, but for sure in 2027, with degradation again in 2028 with the delivery of a significant number of G400s." — Phebe Novakovic, Chairman & CEO

Assessment: A rare, specific multi-year margin frame: high-teens by 2027, then a deliberate step-down in 2028 as the lower-margin G400 ramps. That is a credible, mix-honest trajectory, and it tells you the Aerospace re-rate is a 2026-2027 story, not an H2 2025 one.

2. The G800 Launch

First G800 deliveries begin in Q3, with about 13 planned for the full year, roughly three fewer than the prior-year H2 G650 count. Management flagged that initial G800s will not carry G650-level margins but will come out of the gate at a higher lot-1 incremental margin than the G700 did, because they bear less developmental cost. Notably, the first 20 G800s are going to existing G650 owners, an effectively captive replacement base, with "significant interest" cited from Fortune 500 buyers.

Assessment: The G800 launching into the G650's installed base is the lowest-risk way to introduce a new model. The margin will build by lot, as the G700's did, so the 2026-2027 mix benefit is the payoff, not the near-term H2 drag.

3. Marine Orders: A $14.6B Backlog Jump

Marine backlog rose 38% to nearly $53B, driven by a contract for two Block V Virginia-class boats, including a one-of-a-kind special-mission hull. Crucially, the award carried investment funds for shipyard productivity, wage increases, and additional training, the same category of industrial-base funding the Navy and Congress have directed in recent years to stabilize the submarine supply chain.

"These funds complement the funding that the Navy and Congress have provided over the last several years to help stabilize and improve the submarine industrial base. Taken together, these will help further improve EB throughput and productivity." — Kim Kuryea, CFO

Assessment: This is the bull pillar in one data point. The submarine program is not just a volume story; the contracts increasingly fund the productivity investments that should, over time, lift the 6.9% margin. The risk is timing: throughput gains have been slower than hoped, gated by supplier quality escapes.

4. Electric Boat Supply Chain

Management was candid that Electric Boat continues to experience late material and quality escapes from suppliers, disrupting workflow even as the yard develops workarounds. The strategy is to control what can be controlled on the deck plates while the Navy and Congress fund industrial-base stabilization.

Assessment: The supply chain is the gating factor for both Marine throughput and margin. "Some stabilization in some important areas" is honest but not yet a clean tailwind; this remains the operational risk most likely to disappoint near-term.

5. The Order Supercycle

Companywide orders of $28.3B produced a 2.2x consolidated book-to-bill (2.4x defense, 1.3x aerospace), the strongest first-half intake since 2022. Backlog hit a record $103.7B and total estimated contract value crossed $161B. The breadth matters: Marine led, but Aerospace's 1.3x and Combat's 1.0x show demand is not concentrated in one franchise.

Assessment: A 2.2x book-to-bill converts directly into revenue visibility. The record backlog is the foundation of the multi-year revenue-growth case and the main reason the stock has re-rated; the question for the rating is how much of that is already in the price.

6. Combat Systems and European Rearmament

Combat's flat top line masked a positive mix shift: European land-systems growth (1.5x H1 book-to-bill) offsetting the Booker cancellation and softer U.S. combat-vehicle volume. Management is investing ahead of need for the next-generation main battle tank and expanding munitions capacity with the Army.

Assessment: European defense spending is the cleanest new secular tailwind in the portfolio, and GD's European footprint is positioned for it. This is an underappreciated source of multi-year Combat growth that the flat reported revenue obscures this quarter.

7. Technologies: Award Cadence the Swing Factor

GDIT navigated a slow adjudication environment, customer award decisions down significantly versus H1 2024, yet still grew and booked six $100M+ wins. Management held Technologies guidance unchanged given market fluidity, with the H2 revenue outcome hinging on the pace of federal award decisions and the transactional timing of Mission Systems' high-speed encryption business.

Assessment: A prudent, hold-the-line stance. The risk is one-sided to revenue (timing of awards), not earnings; management sounded confident on the earnings line regardless of the top-line cadence.

8. Cash Generation and the R&D Tax Tailwind

Operating cash flow was $1.6B (158% of net earnings), with all four segments contributing; H1 free cash flow of $1.1B is ahead of plan. Management guided full-year cash conversion toward ~90%, an improvement, with the majority of cash landing in Q4. Separately, the reversal of the prior law's R&D-capitalization requirement (under recent tax legislation) will provide a cash benefit GD has not yet quantified.

"We expect a strong second half with the majority of cash generated in the fourth quarter, which should push us towards a cash conversion rate around 90% for the year... Reversing the prior law's requirement to capitalize R&D expenses will provide us a cash benefit." — Kim Kuryea, CFO

Assessment: Cash is the quiet bull pillar. A ~90% conversion guide plus an unquantified R&D-capitalization tailwind sets up the capital-return engine (dividend growth, resumed buybacks) for H2 and 2026.

9. Capital Deployment: Buybacks Paused

GD paid $402M in dividends but made no share repurchases in Q2, a function of cash timing (H1 is seasonally cash-light). It also reduced total debt by $897M, refinanced $750M of maturing notes, and ended at a net-debt position of $7.2B, down $1.2B sequentially. No further maturities until 2026.

Assessment: The pause is a timing artifact, not a capital-allocation signal; with Q4-weighted cash generation and a clean maturity ladder, buybacks should resume in H2. Debt reduction in a rising-backlog environment is the right priority.

10. Management Reorganization

GD created a new EVP of Global Operations role (Danny Deep), explicitly to drive operating leverage program-by-program across the portfolio, with particular focus on units that have struggled up the learning curve. Management was clear the business will be run the same way; this is an intensification of the existing operating-discipline focus, not a strategic shift. Combat and Mission Systems will remain separate.

Assessment: A sensible move for a portfolio that has grown quickly. The implicit target is Marine, where the largest operating dollars sit and the margin gap to potential is widest.

Guidance & Outlook

The raise was clean and broad: revenue lifted ~$900M, EPS to a $15.05-$15.15 range, and the operating margin held at 10.3% despite a 20bps trim to the Aerospace margin assumption (more deliveries, slightly less favorable mix). Gulfstream full-year deliveries are now planned at 150-155 units. Combat and Marine both see better earnings on higher revenue, and Technologies guidance is unchanged.

Implied H2 ramp: H1 EPS was $7.40, so the new $15.05-$15.15 guide implies H2 EPS of roughly $7.65-$7.75, with Q4 the seasonally strongest quarter on cash and Aerospace deliveries. Management signaled Q3 Aerospace margin similar to Q2's with a stronger Q4.

Street at: Consensus FY2025 EPS sat just below the new range pre-print; the raise pulls the Street up toward ~$15.10.

Guidance style: GD's pattern is to guide conservatively and raise through the year. The cash conversion bump (toward ~90%) and the explicit exclusion of the R&D-tax cash benefit from the estimate are classic under-promise framing.

Analyst Q&A Highlights

G800 Delivery Cadence and Margin by Lot

The opening question pressed on when the first G800 delivers and how profitability builds across production lots. Management would not split deliveries by quarter but reaffirmed the H2 plan and gave an unusually clear lot-by-lot margin frame: the G800 starts at a higher lot-1 incremental margin than the G700 did because it carries less developmental cost, then builds as the program comes down the learning curve.

Q: "Any sort of guidance you can give us on how to think about G800 profitability by lots over time?"
— Gautam Khanna, TD Cowen

A: "The G800 comes out of the box at a higher lot-1 at a higher incremental margin than the 700 that didn't bear as much of the developmental costs. And it will have margin expansion as we come down our learning curves and move from one lot to the next."
— Phebe Novakovic, Chairman & CEO

Assessment: The most thesis-relevant exchange of the call. A new model that starts at higher lot-1 margin than its predecessor de-risks the Aerospace margin path; the only near-term cost is the H2 dilution from early units and the remaining G700 flight-test aircraft.

Aerospace Services Slowdown and the Margin Algorithm

A recurring line of questioning probed why the services business softened after two strong years and what the right forward framework is. Management declined to offer a single algorithm, attributing services margin to quarter-to-quarter mix (MRO, completions, FBO volume) and confirming services revenue was down in the quarter, while reiterating that services should keep growing with the installed fleet.

Q: "It seems like in services, after a strong couple of years, things seem to have slowed down a little bit here in the first half... what's sort of a good algorithm for services going forward?"
— Seth Seifman, JPMorgan

A: "I don't know that there's a given algorithm for thinking about margin in the service world, but we expect it to continue to grow with the fleet, and we're very pleased with how we have done there."
— Phebe Novakovic, Chairman & CEO

Assessment: A candid non-answer. Services is structurally lumpy, so modeling it precisely is futile; the secular driver (a growing Gulfstream installed base) is intact, but quarters will be noisy. This is a modest reason the Aerospace re-rate needs patience.

What Drove the 22% Marine Revenue Jump

Analysts flagged the unusually large sequential Marine increase. Management attributed it to construction volume (roughly 60% Virginia, 40% Columbia, plus a modest DDG-51 uptick) and to timing plus improving shipyard performance, framing the segment's normal cadence as ~9% annual growth with occasional high-teens quarters.

Q: "On Marine, the big increase you saw in revenues in Q2 - that's unusual to see that large of a jump there. Can you talk about what happens specifically related to Virginia-class, Columbia-class?"
— Doug Harned, Bernstein

A: "Virginia was about 60% of the volume, Columbia about 40%, and it really just was the construction volume... the 22% growth in this quarter is really just a question of largely both timing, but also continued increasing performance at the shipyard."
— Phebe Novakovic, Chairman & CEO

Assessment: The 22% is partly timing and won't be the run-rate, but the "increasing performance at the shipyard" comment is the tell that matters: throughput, not just funding, is starting to move. That is the precondition for the margin story.

Volume vs. Mix in the Bridge to High-Teens Aerospace Margins

A direct question asked whether reaching high-teens Aerospace margins requires materially higher Gulfstream volume than the planned 150-155 deliveries, or whether the learning curve and mix get there. Management said it is a combination of both, declining to isolate a single lever.

Q: "Does getting to high-teens margins at Aerospace require meaningfully higher Gulfstream deliveries than the 150 to 155 you're planning for 2025? Or is that bridge primarily driven by coming down the learning curve and optimizing the mix?"
— Scott Deuschle, Deutsche Bank

A: "I think it's a combination of all of that... it will be mix and it will be volume in simple terms."
— Phebe Novakovic, Chairman & CEO

Assessment: Management has the capacity to build 200 aircraft annually against ~150-155 planned, so volume is an available lever if demand holds. The high-teens target leans on both higher G700/G800 mix and the learning curve, which is why 2027 is the credible date.

Portfolio-Wide Margin Potential

Asked where the portfolio's margin can go after slipping from the low-teens of years past to the low-10s recently, management pointed squarely at Marine as the largest opportunity and handed the answer to the new operations EVP, who framed the focus as program-by-program learning-curve improvement.

Q: "The portfolio as a whole used to run in the range of 12% to 13% margins, more recently running in the low 10s... any thoughts on where the margin potential is for the portfolio as we move forward?"
— David Strauss, Barclays

A: "The one that jumps out at you is the Marine Group. Those margins over time need to improve... where we've had some challenges getting up the learning curve, that's where our focus is going to be."
— Phebe Novakovic, Chairman & CEO / Danny Deep, EVP Global Operations

Assessment: Management is naming Marine as the margin-recovery lever, which aligns the new operations role with the single biggest swing factor. The honest framing ("over time") is a reminder this is a multi-year, not a 2025, project.

NASSCO EAC and Auxiliary-Ship Demand

On the small negative NASSCO EAC adjustment, management set the market context (rising demand for the auxiliary ships that support the battle fleet) and attributed the charge to a flood that cut prime production from two lines to one, creating rework expected to clear by year-end.

Q: "You made some comments about NASSCO, maybe a small negative EAC there. Can you talk about what's going on out at NASSCO and the impact the new administration's priorities might have?"
— Jason Gursky, Citi

A: "It really started with the flood and the impact the flood had on our prime line. It took us down from two lines to one... we think we'll largely be through that by the end of the year."
— Danny Deep, EVP Global Operations

Assessment: An idiosyncratic, contained one-off rather than a program-execution problem. Auxiliary-ship demand is a quiet positive; the EAC is noise that should not recur once the second prime line is restored.

Potential Split of Virginia-Class Construction

The closing question raised the Navy Secretary's comment that Huntington Ingalls and Electric Boat might each build Virginia-class boats separately rather than under the current teaming arrangement, and what capital that would require. Management said skilled labor and regional capacity are not constraints and that only modest additional capital would be needed, deferring to the Navy on strategy.

Q: "If the Navy were to pursue having HII and Electric Boat each build Virginia-class separately, how much capital would you need to invest, and is there enough skilled labor for EB to handle one Virginia by itself while continuing Columbia?"
— Scott Mikus, Melius Research

A: "Skilled labor has not been an issue for Electric Boat for some time now... We would need some additional capital if the Navy ups on that strategy, but not an enormous amount."
— Phebe Novakovic, Chairman & CEO

Assessment: A potential upside optionality, more submarine work flowing to EB, at low incremental capital. It is early and Navy-dependent, but it frames the submarine franchise as having capacity headroom rather than a ceiling.

What They're NOT Saying

1. No 2026 guidance: Management explicitly declined to discuss next year, normal at the half but notable given how much of the bull case (Aerospace high-teens margin, Marine throughput) is a 2026-2027 event. The forward case rests on multi-year framing, not a quantified out-year guide.
2. No quantification of the R&D-tax cash benefit: The cash tailwind from reversing R&D capitalization is acknowledged but unquantified on timing or amount, leaving the full-year cash figure deliberately conservative.
3. No timeline for Marine margin recovery: Management committed to improvement "over time" but offered no target margin or date, the single biggest omission given Marine's rising mix weight.
4. G400 quietly slowed: Management acknowledged "we've slowed down the 400 a bit" and declined to give an entry-into-service date, with the 2028 margin degradation tied to its ramp. The deceleration is framed as capacity prioritization, not an FAA issue, but the lack of a date is a small information gap.
5. Buyback resumption not committed: No repurchases in Q2 and no explicit commitment to a Q3/Q4 buyback level, only the implication that Q4-weighted cash supports it.

Market Reaction

• Pre-print setup: GD closed at $297.60 on 2025-07-22, up 12.9% YTD and 5.4% over the trailing 30 days, but only 1.1% over the trailing twelve months, having spent much of the prior year range-bound below its $314.03 prior closing high.
• Reaction day (2025-07-23, BMO print): The stock gapped up ~4.2% to $310.00 at the open and built through the session to close at $316.94, up 6.5% (+$19.34), a fresh closing high, on roughly 2.0x the 30-day average volume. The S&P 500 rose 0.8% that day.

The +6.5% move is the market re-rating the franchise on the combination of a broad beat, a clean guidance raise, and a record backlog, with Aerospace's 230bps margin jump and the multi-year high-teens-margin frame as the swing factor. The size of the move into a fresh high is precisely the issue for the rating: a quality quarter met an already-appreciated stock, and the gap closed most of the obvious upside in a single session.

Street Perspective

Debate: Is the Defense/Backlog Re-Rating Justified or Stretched?

Bull view: A record $103.7B backlog, a 2.2x book-to-bill, and a multi-decade submarine program justify a premium multiple; this is the most visible revenue base in the group, and European rearmament adds a fresh leg.

Bear view: At ~21x raised current-year EPS and a fresh high, the easy money on the defense trade is made; consolidated margin is stuck near 10% because the fastest grower (Marine) is the lowest-margin segment.

Our take: Both are right, which is why this is a Hold. The franchise quality and visibility are real, but a 6.5% pop to a new high at 21x leaves little margin of safety; we would rather pay up after proof the Aerospace margin curve is bending or on a pullback.

Debate: Can Aerospace Margins Reach the High Teens?

Bull view: The path is laid out, G700 maturing, G800 launching at higher lot-1 margin into a captive G650 base, services growing with the fleet, with management committing to high-teens by 2027.

Bear view: Aerospace margin is "the most complex thing to forecast" by management's own admission; services are lumpy, early G800s and remaining G700 flight-test aircraft dilute H2, and the G400 degrades mix again in 2028.

Our take: The bull case is credible but back-end-loaded. The inflection is a 2026-2027 event, so the stock can re-rate on it, but not yet; this is the catalyst we would upgrade into as it becomes visible in the numbers.

Debate: Will Marine Margins Ever Inflect?

Bull view: Contracts now fund shipyard productivity, wage, and training investments; throughput is improving, and the new operations EVP is targeting Marine specifically, so the 6.9% margin should grind toward the high single digits and beyond.

Bear view: Supplier quality escapes keep disrupting workflow, the margin has been stuck in the 7s for years, and "over time" with no target date is not a thesis you can underwrite.

Our take: We lean cautiously constructive; the funding mechanism is genuinely changing, but we need to see the margin actually move before crediting it. Until then, Marine is a growth-and-visibility story, not a margin story.

Model Update & Valuation Framework

Valuation: At $316.94 the stock trades ~21.0x the $15.10 midpoint of the raised FY2025 EPS guide, and roughly 18-19x a mid-teens-growth FY2026 EPS estimate. The dividend (~$6.00 annualized) yields ~1.9%, and book value is $87.66. That is a full multiple for a defense prime whose consolidated margin sits near 10%; the premium is earned by backlog visibility and the Aerospace optionality, but it prices in the good news.

Valuation impact: A fair-value range of roughly $300-$330 frames the stock as fully valued after the move, with upside requiring either a higher FY2026 EPS path (Aerospace inflection) or a multiple defended by continued record orders.

Thesis Scorecard: Initiating Coverage

As this is our initiation, we establish the standing thesis below rather than grade a prior one. Future quarters will be scored against these pillars.

Overall: A high-quality franchise with multiple live growth vectors, initiated at a moment when the stock has already re-rated to reflect them.

Action: Initiate at Hold. We want a better entry, or visible proof of the Aerospace margin inflection, before paying up; we would upgrade on a pullback toward the high-$280s/low-$290s or on H2 evidence that Aerospace margin is tracking ahead of the high-teens-by-2027 frame.