Defense contractor General Dynamics Corp. said its third-quarter profit increased 16 percent on growth in its information technology unit and continued demand from the Army for armored combat vehicles.
The Falls Church-based company said it earned $374 million ($1.84 a share), up from $322 million ($1.60 a share) in the comparable period of 2004. Sales rose 16 percent, to $5.4 billion from $4.6 billion.
Chief executive Nicholas D. Chabraja told financial analysts in a conference call that the results were driven by sales and profit increases in three of the company's four main divisions: combat systems; information systems and technology; and Gulfstream, the maker of corporate jets.
Chabraja singled out the combat systems unit's performance, saying increased orders for the Stryker, a wheeled armored transport used in Iraq, and for upgrades for the Army's fleet of Abrams tanks contributed to a "powerful year."
General Dynamics, which has about 5,300 workers in the Washington area, said its only trouble spot was its shipbuilding unit, which reported nearly flat revenue growth of 1.5 percent.
Chabraja said most of the unit's problems were on the commercial, not the military, side and included a $31 million charge on a tanker contract with British Petroleum PLC. The company has moved new management into its NASSCO shipyard in San Diego and expects it to return to profitability, Chabraja said.
Morningstar Inc. analyst Chris Lozier issued a glowing report on the company's prospects yesterday, saying it "has meticulously bought and developed leading positions in key military markets," including becoming one of two Navy shipbuilders and "a dominant supplier of land combat vehicles."
The report cited General Dynamics' "uncommon ability to create wealth," with an average return on invested capital over the past 10 years of 13.3 percent. This compares with an estimated average cost of capital of 4.7 percent, it said, while the four other leading defense contractors had comparable returns that just matched their cost of capital over the same period.
Chabraja was asked in the conference call about a federal jury's verdict last month that General Dynamics owed nearly $130 million to Final Analysis Communications Services Inc., a Lanham-based satellite firm and onetime partner.
He said the company did not include the ruling in its latest results because the judge in the case had "invited attacks on that verdict," which the company planned to file. Chabraja said he didn't expect a final decision for six months.
General Dynamics stock closed yesterday at $121.06, up $1.14, in New York Stock Exchange trading.