General Dynamics [GD] on Wednesday reported strong third quarter financial results with contributions coming from across its business segments.
Net income increased 7 percent to $913 million, $3.14 earnings per share (EPS), from $851 million ($2.85 EPS) a year ago, topping consensus estimates by 7 cents EPS. Sales increased 7 percent to $9.8 billion from $9.1 billion a year ago. Operating margin held steady at 12.5 percent.
Growth in the quarter was led by the company’s Aerospace segment on increased deliveries of large and mid-cabin business jets, followed by the Combat Systems and Marine Systems segments. Volume in the two defense segments was higher in part on M1 Abrams tanks and Stryker wheeled combat vehicles for the Army, and ordnance and munitions, as well as ship repair work at its NASSCO shipyard, Phebe Novakovic, GD’s chairman and CEO, said on the company’s earnings call.
Aerospace, Combat Systems and Marine Systems all reported double-digit percentage gains in sales. Organic revenue in the defense businesses, which also includes the Information Technology and Mission Systems segments, was up 5 percent organically.
On the income front, Marine Systems drove the gain, up nearly 24 percent, followed by Combat Systems, Aerospace and Mission Systems. Operating earnings were higher at Marine Systems in part on the closing out of the Navy’s Virginia-class Block III submarine production and increased income at NASSCO, Novakovic said.
GD has completed the design of the Navy’s new Columbia-class ballistic missile submarine and is 54 percent complete on the production drawings, “which reflects good progress,” she said.
The only segment that was down in both sales and operating earnings was Information Technology.
The sales decline in the IT segment is mainly due to previous divestitures and operating earnings were impacted in part due to a termination settlement related to leaving a non-core business, Novakovic said. The segment overall is performing well and generated $2.3 billion in orders during the quarter, despite having nearly $1 billion in contracts it won that are delayed by protests, Novakovic said. She also said that over half of $65 billion in work GDIT has bid on has also been delayed.
“The underlying metrics of this business remain solid,” Novakovic said.
There is no change in the company’s guidance for 2019, Novakovic said, noting that “we seem to be right on track with the comprehensive outlook I gave you last quarter.” In July, Novakovic said sales this year will be $39.2 billion and operating earnings around $4.6 billion. The outlook for per share earnings is between $11.85 and $11.90.
GD will provide initial guidance for 2020 during its fourth quarter call in January.