Led by its aerospace business, General Dynamics on Wednesday reported strong fourth-quarter earnings on solid sales. Management said it expects continued growth in 2020.
The Reston, Va.-based company, whose subsidiary, General Dynamics Electric Boat, is the prime contractor on the Navy’s next-generation Columbia-class ballistic-missile submarines, also signaled an improved outlook in cash collections that will improve financial flexibility.
General Dynamics’ fourth-quarter net income increased 12% to $1 billion, or $3.51 per share, from $909 million, or $3.07 a share, a year ago, topping consensus estimates by $0.07 per share. Sales increased 4% to $10.8 billion from $10.4 billion a year ago, largely on the back of the company’s commercial aviation branch.
For the year, General Dynamics reported a 9% increase in sales to $39.4 billion from $36.2 billion in 2018. Total 2019 net income increased 4% to $3.5 billion, or $11.98 a share, from $3.3 billion, or $11.18 a share, a year ago.
The company’s Aerospace segment, which makes Gulfstream business jets and provides business aviation services, reported a 26% increase in operating earnings on an 8% increase in sales to $2.9 billion due to higher aircraft deliveries.
“With our strong balance sheet and increased certainty around our international cash forecast, we now have a level of financial flexibility that we did not enjoy last year,” according to Jason Aiken, the company’s chief financial officer.
General Dynamics Chairman and CEO Phebe Novakovic said company’s priorities with the improved cash position are dealing with short-term debt and then buying back stock.
“We intend to utilize it to create value for our shareholders,” Novakovic said. She declined to comment on potential acquisition opportunities in response to an analyst’s question.
Total backlog increased 28% to a record $87 billion versus $67.9 billion a year ago, driven mainly by a blockbuster $22.2 billion Navy order in December for the Block V Virginia-class attack submarine program.
In 2020, GD expects sales of just over $40.7 billion, a 4% rise from 2019, and earnings between $12.55 and $12.60 per share.
The Navy is replacing 14 Ohio-class ballistic-missile submarines with 12 Columbia-class submarines. Although margins are tight, the Navy insists the first Columbia will go out on patrol as scheduled in 2031. The Columbia fleet is supposed to last into the 2080s.