General Dynamics Corporation (GD) in the first quarter of fiscal 2010 beat the Zacks Consensus earnings (EPS) estimate by 3 cents to reach $1.54, in line with the year-ago quarterly earnings. On a reported basis, including one-time items, earnings came in at $1.53 in the reported quarter, in line with results from the year-ago quarter.
Operational Results
General Dynamics’ revenue decreased 6.2% or $514 million to $7.8 billion in the reported quarter. The company reported earnings from continuing operations of $599 million, compared with $593 million in the year-ago quarter. Net earnings were $597 million, compared to $590 million in the first quarter of 2009. Operating margins for the reported quarter were 11.8%, compared to 11% in the year-ago period.
Segmental Performance
In the reported quarter, General Dynamics witnessed a higher top-line only in the Information Systems & Technology (0.7%). The other three segments witnessed lower revenues year-over-year. Combat Systems fell 16.8% year-over-year, while Aerospace and Marine Systems fell 6.7% and 1.8%, respectively, year-over-year.
General Dynamics’ quarterly Aerospace operating earnings witnessed steep growth of 9% year-over-year, while Information Systems & Technology operating earnings grew marginally by 0.3%. However, the company witnessed lower operating earnings in Combat Systems and Marine Systems, which fell 3.6% and 1.2%, respectively, year-over-year.
Financial Condition
General Dynamics generated $210 million in cash from operating activities in the reported quarter, compared to $154 million in the year-ago quarter. The company ended the reported quarter with cash and cash equivalents of $2.0 billion, compared to $1.1 billion at the end of the year-ago quarter. Long-term debt remained constant year-over-year at $3.2 billion.
Outlook
General Dynamics’ funded backlog at the end of the first quarter of 2010 grew to $47.4 billion, a 3% increase over the end of fiscal 2009. In the reported quarter, the company won important contracts, like T-AKE combat-logistics ships, Stryker vehicles, Army’s next-generation on-the-move tactical battlefield network, and the DDG-51 program of the U.S. Navy.
Overall, General Dynamics’ total backlog stood at $63.9 billion at the end of the reported quarter. The company estimates the total contract value of its current backlog at $80.9 billion. As per the Zacks Consensus Estimate, earnings per share for fiscal 2010 are expected to be $6.55.
General Dynamics was the fourth largest U.S. defense contractor in terms of revenue in fiscal 2009, after Boeing Company (BA), Lockheed Martin Corporation (LMT) and Northrop Grumman Corporation (NOC). The company’s revenue exposure is spread over a broad portfolio of products and services in business aviation; combat vehicles, weapons systems and munitions; shipbuilding design, repair and construction; and information systems, technologies and services.
We currently have a market Neutral recommendation on the Zacks #3 Rank stock.
Read the full analyst report on “GD”
Read the full analyst report on “BA”
Read the full analyst report on “LMT”
Read the full analyst report on “NOC”
Zacks Investment Research
