By Cal Biesecker
Defense Daily
General Dynamics, the Pentagon’s contractor for the next-generation ballistic-missile submarine, on Wednesday posted a strong finish to its fiscal year, delivering big gains in earnings and sales in the fourth quarter, aided in part by lower taxes and an acquisition last year.
Net income in the quarter soared 43 percent to $909 million, $3.07 earnings a share, from $636 million, or $2.10 a share, topping consensus estimates by nine cents a share. A charge in the fourth quarter a year ago related to federal tax reform dinged the company’s earnings then but, absent a similar charge this year, a lower tax rate accounted for nearly half of the increase in income.
GD Chairman and CEO Phebe Novakovic said on the company’s earnings call that the per share earnings were higher than analysts’ estimates due to lower than expected taxes and a lower share count.
Operating profit at the company’s five segments was up 16 percent, driven mainly by gains at the Information Technology, Marine Systems and Aerospace segments, helping to further lift net income in the quarter.
Sales increased 25 percent in the quarter to $10.4 billion from $8.3 billion a year ago, driven in large part by the contribution from acquired IT provider CSRA, as well as handsome growth in the business jet and aircraft services segment on higher deliveries and favorable product mix. GD also posted also revenue increases at all of its Navy shipbuilding businesses, and legacy growth in its information technology segment.
For all of 2018, sales increased 17 percent to $36.2 billion from $31 billion in 2017, and net income rose 15 percent to $3.3 billion, or $11.18 a share, from $2.9 billion or $9.50 a share.
For 2019, sales are expected to be about $38.5 billon, a 6 percent increase over 2017, operating margins of about 11.7 percent, and per share earnings between $11.60 and $11.70, Novakovic said. To beat the forecast, she said the company will have to outperform the operating plan, enjoy a lower than expected tax rate, and reduce the share count.
This story first appeared in Nuclear Security & Deterrence Monitor affiliate publication, Defense Daily.
