General Dynamics' Profit Rises 32 Percent
Thursday, April 24, 2008
General Dynamics said its earnings were up 32 percent in the first quarter, helped by increased sales in its divisions that make tanks, armored vehicles and other equipment.
Profit at the Falls Church company was $572 million ($1.42 a share), up from $434 million ($1.06) in the comparable period a year earlier. Sales grew 11 percent, to $7.01 billion.
Sales increased in three of its major divisions. Aerospace increased 17 percent, to $1.3 billion. Combat systems and marine systems rose 27 percent, to $2 billion, and 10 percent, to $1.38 billion, respectively. Sales in its information technology segment were down 1 percent, to $2.35 billion.
International customers in China and the Middle East are boosting sales of the company's Gulfstream private jet, benefiting its aerospace division. Demand is high for a new, bigger, faster Gulfstream jet, called the G650, company officials said.
General Dynamics, like other major defense contractors, has benefited greatly from the war efforts in Iraq and Afghanistan.
Its combat systems division has gotten a major boost from its work on Mine Resistant Ambush Protected vehicles, or MRAPs, as the Pentagon has ordered thousands of them. The company sold about $500 million of MRAPs in 2007 and is expected to sell $600 million to $800 million this year, according to Myles Walton, an analyst at Oppenheimer in Boston.
But the orders are mostly fulfilled, and General Dynamics's contract with the Pentagon ends in June. "As MRAP revenues trend down, they've got the Stryker [armored vehicle] and the Abrams [tank] at production rates that are on the rise, and they'll sustain their growth in combat systems," Walton said. The company is also bidding on a major Pentagon contract to replace more than 100,000 Humvees, and it is trying to get into fixing up worn-out military equipment, analysts said.
Nicholas Chabraja, the company's chairman and chief executive, did not update guidance for 2008.
"We obviously enjoyed tremendous operations in the quarter," he said. "Each business segment improved margins significantly. By almost any measure, this was a great quarter. Given the strong start of this quarter, it is apparent to me that the original guidance was conservative."
Chabraja, 65, who is expected to retire in June 2009, said the board would announce his successor next month.
The company's stock closed down 32 cents, or 0.3 percent, at $87.69.