Better-than-expected operating margins at Savannah-based Gulfstream Aerospace powered parent company General Dynamics to a strong finish in 2013, according to an earnings report released by the company Wednesday.
“General Dynamics performed well in 2013, reflecting our continued focus on operations, cost management, cash generation and our commitment to meeting our customers’ requirements,” said Phebe N. Novakovic, chairman and chief executive officer. “As promised, we managed our company prudently, adjusting our business to reflect the realities of the current defense spending environment and retiring risk throughout the organization.”
Gulfstream Aerospace was once again the highest performing of the company’s four business sectors, with 2013 revenue up more than 17 percent and operating margins a full 5 percent higher than 2012.
General Dynamics (NYSE: GD) reported 2013 earnings from continuing operations of $2.5 billion, or $7.03 per share fully diluted, on revenues of $31.2 billion Fourth-quarter earnings from continuing operations of $624 million, or $1.76 per share on a fully diluted basis. Revenues for the quarter were $8.1 billion.
Gulfstream reported full year earnings of $8.1 billion, up 17.4 percent over 2012. Operating earnings came in at $1.4 billion, up 65 percent.
“The unusually large jump in earnings is due to a $191 million restructuring charge for Jet Aviation in late 2012,” said Sterne Agee analyst Peter Arment. “When that charge is pulled out, operating earnings are up about 14 percent.”
Operating margins were 17.4 percent, compared to 2012 margins of 12.4 percent.
For the fourth quarter, aerospace revenues were $2.1 billion, up 14.7 percent over 4Q 2012.
“I’m particularly pleased with the order book in the quarter,” Novakovic told analysts in a conference call Wednesday. “Not only did we increase our backlog, we increased it where we needed it — in the G450 and G550.”
Gulfstream expects to deliver 118 large-cabin aircraft and 40 mid-cabin aircraft in 2014, Novokovic said. All of the company’s large-cabin jets — the G450, G550 and G650 — are manufactured in Savannah.
Wait times for booked orders are 9-12 months for the mid-cabin G280, 12-15 months for the G450 and G550 and 45 months for the G650, the company’s newest and largest business jet.
Novakovic said she doesn’t anticipate significant compression of the G650 wait time.
“When you manufacture a complex platform such as the G650, you have to be mindful of the stress it puts on the supply chain,” she said. “Our pipeline is robust, and we are where we need to be in relation to G650 deliveries.”
General Dynamics’ companywide guidance for 2014 projects revenues of $9 billion, up 11 percent; operating earnings up between 7.3 and 7.5 percent and operating margins of 17 percent.
But those numbers may not materialize until later in the year, Novakovic cautioned.
“We expect the first three quarters to be lower, with a dramatic increase in the fourth quarter,” she said.