General Dynamics (GD), one of the world's largest manufacturers of aerospace equipment, recently released a strong report for Q2 2015. According to the report, quarterly revenue increased by 5.5% y-o-y to USD 7.88 bn, outpacing expectations of USD 7.70 bn. Aerospace engineering segment (+14% y-o-y) became a revenue growth driver. Operating profit increased by 13.9% y-o-y to USD 1.08 bn, while operating margin climbed 1 pp. Adjusted EPS jumped 43.7% to USD 2.27, outstripping the consensus of USD 2.03. The company generates a significant cash flow, which allows General Dynamics to buy back its own shares and pay generous dividends. The company spent USD 1.57 bn for buyback since the beginning of fiscal year. Dividend payouts amounted to USD 432 mn, while dividend was USD 0.69 (+11.3% y-o-y), yielding 0.9%. The funded backlog significantly increased from USD 50.7 bn to USD 55.4 bn. As a result, adjusted EPS forecast for 2015 was revised up from USD 8.05-8.10 to USD 8.70-8.80. We believe that General Dynamics will continue to improve its financial performance in the mid-term due to higher demand for aerospace equipment. All of this, coupled with growing dividend and buyback program will boost the company’s share price in the mid-term.Our mid-term fundamental valuation of the name is USD 165. The short-term technical target is USD 158.