EB parent’s full-year profit rises 18.7%

FALLS CHURCH, Va. – Military contractor General Dynamics Corp. (NYSE: GD) today posted a 2008 profit of $2.46 billion, an 18.7 percent increase from the year-ago $2.07 billion, on full-year net sales that grew 7.6 percent to $29.30 billion. Earnings per diluted share increased to $6.17 from the preceding year’s $5.08 per share.
“For the full year of 2008, all four business groups generated increased sales, operating earnings grew significantly faster than revenue and free cash flow from operations totaled 106 percent of net earnings,” Chairman and CEO Nicholas D. Chabraja said in today’s report. “These results reflect our continued focus on creating shareholder value through the fundamental strengths of the company: maximizing the profitability of a durable and growing backlog, through continual performance improvement; and strong cash generation that supports strategic capital-deployment decision-making.”
The company’s total backlog of orders grew to $74.13 billion at year’s end, up from $60.49 billion at the end of the third quarter and $46.83 billion at the end of 2007, General Dynamics said. The Marine Systems division, which includes Electric Boat, posted a backlog of $26.44 billion; Aerospace had a backlog of $22.48 billion for products including its Gulfstream business jets; Combat Systems had a backlog of $14.96 billion for Abrams tanks and other products; and Information Systems and Technology, maker of battlefield radios and computers, had a backlog of $10.24 billion as of the end of 2008.
The company’s 2008 results beat analyst expectations, according to Bloomberg News.
“General Dynamics continued to perform well in the fourth quarter of 2008,” Chabraja noted. “Sales increased in the Aerospace, Marine Systems and Information Systems and Technology groups when compared [with] the year-ago period, and companywide operating margins increased 30 basis points in the quarter.”
For the quarter just ended, the company posted a profit of $612 million, a 5.7 percent increase from the 2007 fourth quarter’s $579 million, on net sales that grew 4.7 percent to $7.85 billion. Fourth-quarter earnings per diluted share – including a 5-cent loss on discontinued operations – increased 10.7 percent to $1.57 from the year-ago period’s $1.42 per share.
Meanwhile, Chabraja said, “the company’s funded and total backlog grew significantly [compared with] the previous quarter – and Marine Systems’ total backlog more than doubled, reflecting an order for eight additional Virginia-class nuclear-powered submarines.” The $13.8 billion multi-year deal, which EB finalized last month, is the largest submarine contract in U.S. history. (READ MORE)
Other Marine Systems highlights last year included the signing of a Navy contract to design a common missile compartment (CMC) for the next-generation U.S. and U.K. submarine.
“Given the strength of our performance in 2008 and our record backlog going into the new year,” Chabraja said, “we expect 2009 earnings to be in the range of $6.70 to $6.75 per share, fully diluted.”
“It looks like they are poised to have another good year in 2009, which is going against the consensus view that Gulfstream would erode their earnings,” Peter Arment, a Greenwich, Conn.-based analyst with Broadpoint AmTech, told Bloomberg News. “There is probably over $7 a share in earnings power for General Dynamics,” he added. “We view this as the initial conservative guidance.”
General Dynamics Corp. (NYSE: GD) is the largest maker of armored vehicles for the U.S. military. The company employs about 92,300 people worldwide in four divisions: Aerospace, Combat Systems, Marine Systems and Information Systems and Technology. For more information about the General Dynamics or its Groton-based nuclear submarine unit, Electric Boat, visit www.GeneralDynamics.com or www.gdeb.com.