General Dynamics (GD) last Friday reported strong third quarter financial results largely due to its Marine Systems segment, continuing a sturdy run of top and bottom-line gains all year.
The shipbuilding segment, up 14% and 13% respectively on the top and bottom-lines, benefited from construction of the Navy’s Columbia-class ballistic missile submarine and Virginia-class attack submarine, both of which are dual-capable and will include a variant of warheads the National Nuclear Security Administration is working on.
Construction of the first Columbia-class boat is about 60% complete and GD currently assumes that the next major Columbia and Virginia-class contracts will be awarded this year, GD Chairwoman and CEO Phebe Novakovic said during the earnings call.
Net income increased 14% to $1.1 billion, $3.88 earnings per share (EPS), from $930 million ($3.35 EPS) a year ago, topping consensus estimates by 18 cents per share. Sales increased 11% to $12.9 billion versus $11.7 billion a year ago.
Given the strong results through September, GD increased its earnings guidance to between $15.30 and $15.35 EPS, up from the prior outlook in July of $15.05 to $15.15 per share. Sales are forecast to be around $52 billion versus $51.2 billion projected previously. Operating margin is still pegged at 10.3% and stands at 10.2% year-to-date.
Noting some investors might view the forecast as “cautious,” Novakovic cited the ongoing government shutdown. It has “no end in sight, the longer it lasts, the more it will impact us, particularly the shorter cycle businesses. So, forecasts in this environment are difficult at best and less reliable than one would hope.”
Exchange monitor affiliate Defense Daily first published a version of this article.