General Dynamics profits grow by 19 percent

Falls Church-based General Dynamics said Wednesday that its fourth-quarter profit grew nearly 19 percent, buoyed by sales in its aerospace division.

The defense contractor reported earnings of $729 million ($1.91 per share) for the three-month period, up from $614 million ($1.57) in the same quarter in 2009. Quarterly revenue surged almost 9 percent to $8.6 billion.

The company's earnings for the year also improved, rising to $2.62 billion ($6.81 per share) from $2.39 billion ($6.17 per share) in 2009. Revenue grew to $32.47 billion, a 1.5 percent increase from 2009.

In a call with investors, chairman and chief executive Jay L. Johnson said the company posted a strong quarter and year but is bracing for more constrained budgets.

"That means cutting unnecessary costs to ensure the affordability of our products, continuously improving our operations to drive earnings growth and, if warranted, reshaping our businesses to better align with today's market environment," he said.

Defense Secretary Robert M. Gates announced earlier this month he would cancel the General Dynamics-developed Marine Corps Expeditionary Fighting Vehicle, but Johnson said Wednesday the cancellation would not have a "material impact this year."

The aerospace group posted a particularly strong quarter and year, reporting a 25.7 percent increase in profit during the quarter over the same time period last year. Johnson said the earnings reflected an improved business-jet market and growth in the company's aerospace service business.

Operating profits for the quarter grew in all of the company's four divisions, including a 13.5 percent improvement in its marine systems unit and a 10.3 percent boost in its information systems and technology group.

Johnson forecast a strong 2011, predicting the aerospace group in particular would see double-digit growth, despite pressure on the defense budget.

He said wars abroad and a focus on preserving the defense industrial base will limit military spending cuts, but that General Dynamics assumes "defense spending will be essentially flat over the next five years."

"That will still be more than $100 billion in annual procurement in constant dollars," he said.

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