Halt in Gulfstream production hurts General Dynamics' earnings
Thursday, October 29, 2009
General Dynamics, a major defense contractor headquartered in Falls Church, reported Wednesday that third-quarter profit dropped nearly 10 percent, due in part to a five-week halt in production of its luxury Gulfstream business jets this summer.
The company, which makes ships, combat vehicles and the Abrams tank for the U.S. military, and performs information technology work for the government, said its profit for the quarter was $572 million ($1.47 a share), down from $634 million ($1.59) during the comparable period a year earlier. Sales rose 8.1 percent, to $7.72 billion.
"The company performed well despite the impact of reduced aircraft production at Gulfstream Aerospace," Jay L. Johnson, General Dynamics' chief executive, said in a statement.
Profit in the company's aerospace division was down 56 percent from a year earlier, as sales fell 18 percent, to $1.12 billion. But three of its defense units helped counter the downturn in its Gulfstream, analysts said.
Earnings in its combat systems division, which makes Stryker armored vehicles, were up nearly 21 percent as sales rose 27 percent. The marine division's profit rose 11 percent on sales growth of 8 percent. The company's information systems and technology unit reported a 10 percent increase in profit as sales rose 9 percent.
"For five weeks they stopped making their business jets because the demand collapsed over the last year with the global recession," said Matt Collins, an analyst at Edward Jones. "Everybody who makes business jets has been scaling back." But, he said, General Dynamics' defense-related divisions "continued to soften the blow from the downturn" in business jets.
In a conference call with analysts, Johnson said the company's military programs would not be affected by the shrinking Pentagon budgets.
"In this tough fiscal environment, the equipment that is most relevant to the war fighter will prevail," he said. "General Dynamics' products are at the center of today's fight. . . . I am confident our defense programs will emerge well supported from current budget considerations."