UPDATE: General Dynamics 2Q Net Off 3.6%, Boosts '09 EPS View
July 29 2009 - 1:12PM
Dow Jones News
General Dynamics Corp.'s (GD) second-quarter profit slipped 3.6%
on a year-earlier gain as the aerospace and defense contractor saw
revenue growth across the company.
Earnings were better than analysts expected, and the Falls
Church, Va., company raised its full-year earnings outlook by a
nickel to a range of $6.05 to $6.15 per share.
Earlier this year, the company sharply cut production in its
Gulfstream business jet unit, as corporate customers canceled or
deferred deliveries. The business jet market overall isn't expected
to rebound for another year.
During a conference call Wednesday, Jay Johnson, who this month
became the company's chief executive, said the Gulfstream business
appears to be stabilizing.
"New order interest has improved, and customer defaults are down
almost 50% from last quarter," he said.
Johnson said the market for large-cabin corporate jets is
improving, while the midsize business jet market remains weak.
Gulfstream's quick reaction to the market downturn led the unit to
stronger profitability in the second quarter, compared with earlier
in the year.
On the defense side, Johnson said General Dynamics sees growing
opportunities in the intelligence area. The recent acquisition of
Axsys Technologies Inc. (AXYS), to beef up that business, will
close later this year, and will be accretive to earnings in
2010.
The U.S. Department of Defense's move to end the huge Future
Combat Systems program for the army has resulted in a loss of
future ground vehicle contracts for General Dynamics, but, Johnson
said, "frankly, we see the cancellation of FCS as an opportunity"
as the army has said it will upgrade existing vehicles with new
technology.
For the second quarter, General Dynamics posted income of $618
million, or $1.60 a share, down from $641 million, or $1.60 a
share, a year earlier. There were 3.7% fewer shares outstanding in
the most recent period. The latest results included a 1-cent loss
from discontinued operations, while the prior year's included a
9-cent gain from a tax benefit.
Quarterly revenue rose 11% to $8.1 billion.
Analysts surveyed by Thomson Reuters expected earnings of $1.57
on revenue of $8.13 billion.
Operating margin rose to 11.7% from 11%, improving in all
business segments.
The company's funded backlog grew 5.3% to $47.7 billion.
Shares traded recently at $54.51, up 77 cents, or 1.4%.
-By Ann Keeton, Dow Jones Newswires; 312-750-4120;
ann.keeton@dowjones.com
(Kerry Grace Benn contributed to this report.)