The parent company of Gulfstream Aerospace on Wednesday reported higher than anticipated earnings and revenue for the third- quarter and increased its fourth-quarter guidance, due in large part to a strong performance by its Savannah-based business jet company.
General Dynamics (NYSE: GD), a market leader in business aviation, defense systems, shipbuilding and communications/information technology systems, reported third-quarter net earnings of $694 million — or $2.05 per share — on revenues of $7.75 billion. That compares to $652 million — or $1.84 per share — on revenues of $7.74 billion for the same quarter last year.
Operating earnings came in at $999 million, up 4 percent over the same quarter 2013, while operating margins were up slightly, from 12.1 percent to 12.5 percent.
In a conference call with analysts, General Dynamics CEO Phebe Novakovic indicated the company expects strong fourth-quarter orders across the Gulfstream fleet, including the newly announced large cabin G500 model.
The G500, unveiled last week at Gulfstream headquarters in Savannah, is expected to be available for delivery in 2018. Its sister aircraft — the larger, longer-range G600 — was announced at the same time but isn’t expected to enter service until 2019.
“Gulfstream customers can now choose between the near-term availability of the G450 and G550 and the longer wait for new products, all with different speeds, ranges and price points,” she said. “The clarity of these options for customers is helping to drive decision-making.
“I was particularly pleased with the revenue and earnings growth of our aerospace segment.”
Chief financial officer Jason Aiken said aerospace revenues, earnings and margins were up for the quarter, as well as for the first nine months of 2014.
“The group reported third quarter sales just shy of $2.3 billion, up 6.4 percent from Q3 2013, while operating earnings were up 11.4 percent to $411 million, the highest quarterly earnings the aerospace group has ever seen,” he said.
Operating margins were up to at 18 percent on improved performance in G650 and G280 manufacturing and outfitting, Aiken said.
Novakovic said order backlogs increased in the third quarter for nearly every model, with deliveries for new G650 and G650ER orders anticipated in the third quarter of 2017, new G450, G550 and G150 orders in the first quarter of 2016 and new G280s in the third quarter of 2015.
“It’s really too soon to project what changes in production will be needed to accommodate the new planes,” she said, adding that Gulfstream has the built-in flexibility to balance resources against demand.
Sterne Agee analyst Peter Arment told investors Wednesday that third quarter earnings per share of $2.05 topped his firm’s estimate by 13 cents and the consensus estimates by 14 cents. He attributed the increase to a “strong performance at Gulfstream, with margins driven by the G650 ramp up.”
JP Morgan analyst Joe Nadol told Reuters the company’s aerospace sector delivered a “positive earnings surprise” by generating operating income of $411 million, $10 million more than expected.
Shares of General Dynamics common stock closed up $2.42 — or nearly 2 percent — Wednesday to $126.31.
BY THE NUMBERS
General Dynamics Aerospace Sector
3Q 2013 3Q 2014 Difference
Revenues $2.2 billion $2.3 billion Up 6.4 percent
Operating earnings $369 million $411 million Up 11.4 percent
Operating margins 17.1 percent 18 percent N/A