Defense and aerospace giant General Dynamics Corp. (NYSE: GD) increased its earnings guidance for the year Wednesday as it reported a rise of nearly five percent in second quarter profits.
The maker of Gulfstream business jets, military battle tanks, Navy ships and submarines reported operating earnings of $1.05 billion on revenues of $7.67 billion. Net earnings for the quarter totaled $749 million, or $2.45 per share, 4.9 percent higher than the same quarter in 2016.
The company raised its fiscal 2017 earnings guidance to between $9.70 and $9.75 a share, up from its previous expectation of $9.50 to $9.55.
“General Dynamics’ strong second quarter performance reflects our focus on operations and executing on our programs,” said Phebe Novakovic, chairman and chief executive officer.
“We are confident in our outlook for the future, built on a solid defense backlog and continued good order activity across the portfolio of Gulfstream business jets.”
In the company’s aerospace segment, revenue of $2.08 billion was down $206 million year-over-year, but operating earnings of $425 million were up $1 million for the quarter on a 190-basis-point improvement in operating margins, Novakovic told analysts in a conference call Wednesday morning.
“Aerospace had a very good quarter in all important respects,” she said.
For the first half of the year, aerospace revenue of $4.15 billion was up $87 million against last year.
“Importantly, operating earnings for the period were $868 million, up $112 million – or 14.8 percent — over the first half of 2016,” she said. “This puts aerospace in a very good position to make its revenue goals for the year.”
Looking at the Gulfstream order book, the mix is particularly advantageous, she said, with more than 80 percent of orders for the company’s large-cabin aircraft, all of which are manufactured at its headquarters in Savannah. The G500 and G600 — Gulfstream’s newest business jets, both now in the flight-test phase — continue to build order backlog prior to their entry into service, Novakovic said, adding that the backlog was sufficient to assure the success of their programs.
“Interestingly, the G550 built backlog as well in the quarter,” she said.
As for the state of the market, Novakovic said she saw no reason for concern.
“While we read reports of weak demand and reduced deliveries across the industry, our experience is reasonable and steady demand for our products,” she said, adding that the company will deliver as many aircraft this year as last, on an entry-into-service basis.
Based on early contract activity and discussions, Novakovic said she was comfortable with anticipated third-quarter orders.
“Interest in the G650 and G650 Extended Range — as well as the G550 — remains quite good and supportive of next year’s operating plan.”
The G500 and G600 test flights continue to go well, she said, adding that the aircraft are performing reliably.
Flight certification of the G500 is expected in the last quarter of this year, with the G600 on schedule to certify in 2018.
GULFSTREAM BY THE NUMBERS
Second Quarter 2017
• $2.1 billion in revenue
• 20.5 percent operating margin
First Half 2017
• $4.2 billion in revenue
• $868 million in operating earnings
• 20.9 percent operating margin