Defense contractor General Dynamics Corp. reported a 23 percent jump in profit in its third quarter yesterday despite escalating costs on a contract to build commercial oil tankers.
The Falls Church company reported net income of $322 million ($1.60 per share) in the quarter, compared with $262 million ($1.32) during the same period last year. Revenue increased 8 percent, to $4.8 billion, compared with $4.4 billion.
Shares of General Dynamics fell $1.65, or 1.7 percent, to close at $98.40 yesterday.
"Sales were a bit less than we expected in all sectors, but operating profit . . . was spot-on our estimate," Byron K. Callan, defense industry analyst with Merrill Lynch, said in a research note.
The shipbuilding unit, which includes submarines and military destroyers, continued to struggle with a contract to build four commercial oil tankers. General Dynamics took a $24 million charge to reflect high steel prices, labor costs and subcontractors' costs related to the contract, company officials said.
General Dynamics delivered the first tanker in August and plans to release the second by the end of the year, chief executive Nicholas D. Chabraja said in a conference call with analysts. "I wouldn't tell you that we are without risk as to cost growth, but it's certainly at this point very manageable," Chabraja said.
The company's information technology unit continued to drive growth, with a 27 percent increase in revenue, to $1.7 billion from $1.3 billion. The unit was helped by last year's acquisition of Veridian Corp., which provides network security to the Pentagon and intelligence agencies.
The aerospace unit, which makes the Gulfstream business jet, reported lower revenue but higher profit. Revenue fell slightly, to $798 million, compared with $808 million. Operating earnings grew 134 percent, to $117 million from $50 million.
The company raised its earnings forecast for the year to $5.95 to $6 a share, up from a previous prediction of $5.85 a share.