Defense and aerospace operator General Dynamics Corporation (GD) announced its third-quarter 2010 operating earnings of $1.70 per share, which surpassed the Zacks Consensus Estimate of $1.64. The results of the company were 22 cents ahead of the year-ago figure of $1.48 per share.
The GAAP earnings of the company during the quarter were $1.70 per share versus $1.47 per share reported in the third quarter of 2009.
Total Revenue
General Dynamics generated total revenue of $8,011 million in the reported quarter versus $7,719 million in the year-ago quarter, reflecting a growth of 3.8%. The year-over-year growth in revenue was driven by robust contribution from its three segments, Aerospace, Marine Systems and Information Systems and Technology. The results were partially held down by the lower contribution from Combat Systems.
Reported quarter revenue however failed to meet the Zacks Consensus Estimate of $8,427 million.
Segment Performance
General Dynamics in the quarter witnessed a higher top-line performance at the Aerospace, Marine Systems and Information Systems & Technology segments, notching year-over-year growth of 15.3%, 2.0% and 7.9%, respectively. Combat System, however, witnessed lower revenues, declining 11.8% year over year.
Operating earnings at the Aerospace, Marine Systems and Information Systems & Technology segments increased 59.2%, 9% and 3.4%, respectively, year over year. However, operating earnings at the Combat Systems slipped by 1.6% over the prior year.
Financial Condition
Cash and cash equivalents as of October 3, 2010, were $1,843 million versus $1,409 million as of October 4, 2009.
Cash from operating activities for the first nine months of 2010 was $1,567 million versus $1,357 million in the comparable period in 2009.
Capital expenditure of the company for the first nine months of 2010 decreased by $32 million to $219 million from $251 million in the comparable period in 2009.
The company reduced its debts substantially over the past one year. Long-term debts of General Dynamics as of October 3, 2010, were $2,430 million versus $3,159 million as of October 4, 2009.
Guidance
General Dynamics raised its full-year operating earnings for 2010 to the range of $6.70 to $6.75 per share from $6.60 to $6.65, taking into consideration the robust performance during the quarter under review.
Outlook
In the reported quarter, the company won contracts worth $1.67 billion, out which some significant ones are a contract for Stryker wheeled armored vehicle program, agreement with NASA to modernize the ground segment of the satellite communications network, and a deal with the U.S. Navy for the long-lead material and advanced design efforts for the Mobile Landing Platform program.
Total backlog of General Dynamics at the end of the quarter under review was $61.83 billion, which slipped 6.7% from $66.3 million reported in the year-ago comparable quarter. However, funded backlog, as a percentage of total backlog, at the end of the quarter increased 310 basis points year over year.
We believe the company will be able to meet the new earnings expectation for 2010, as it is backed up by ramping backlog and consistent contract wins. All the segments of the company barring Combat Systems performed well during the reported quarter, which will also add to the ability of the company to achieve its earnings target.
General Dynamics currently retains a Zacks #3 Rank (short-term Hold rating). We maintain our long-tern Neutral rating on the stock.
Based in Falls Church, Virginia, General Dynamics along with its units operates in business aviation, land and expeditionary combat systems, armaments and munitions, shipbuilding and marine systems as well as information systems and technologies.
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