DALLAS — General Dynamics is reaping the benefits from building nuclear submarines as well as the world’s biggest, fastest business jets.
Fourth-quarter profit beat analysts’ estimates as sales soared at General Dynamics’ ship- and sub-producing unit and the company’s Gulfstream division added two new business aircraft to the family led by the $65 million G650.
The results show Chief Executive Officer Phebe Novakovic’s success at investing more at the private-plane unit while cutting costs to cope with declining revenue from some military product lines. Having a commercial-aviation arm cushions General Dynamics from the U.S. defense cuts crimping sales at peers such as Northrop Grumman Corp., the maker of the B-2 bomber.
“We are well positioned for growth in 2016 and 2017,” Novakovic said in a conference call with analysts Wednesday. The Falls Church, Virginia-based company’s order backlog reached $72 billion at the end of 2014, a 57 percent surge from a year earlier, she said.
General Dynamics unveiled two large-cabin jets in October to build on the success of the G650, whose corporate operators include Exxon Mobil, Wal-Mart and Honeywell International. The company also won an $18 billion Navy contract last year for 10 more Virginia-class attack submarines, the biggest weapons deal by the U.S. in more than a dozen years.
“Marine was the standout performer,” Howard Rubel, an analyst with Jefferies LLC, wrote in a note Wednesday. “Gulfstream is benefiting from recent new product launches.”
Product diversity helps set General Dynamics apart from peers such as Northrop and Lockheed Martin Corp., the maker of F-35 fighters. Lockheed gets more than 80 percent of its revenue from the U.S. government and is No. 1 in contracts, according to data compiled by Bloomberg. General Dynamics is No. 3 and gets about 62 percent of its sales from the U.S., the data show.
General Dynamics forecast 2015 earnings per share of $8.05 to $8.10 and revenue of $31.3 billion to $31.5 billion, led by sales at the Aerospace and Marine Systems units, Novakovic said. Combat Systems — the maker of Abrams tanks — will see little change in revenue and sales at information systems will decline.
In the fourth quarter, net income from continuing operations rose 18 percent to $737 million, or $2.19 a share, from $624 million, or $1.76, a year earlier, the company said in a statement. Analysts had predicted $2.13.
Foreign wins at the Combat Systems division, including a British award for $5.3 billion in September for reconnaissance vehicles and a $80 million follow-on contract in December to provide Abrams tanks to Saudi Arabia, have mitigated U.S. defense cuts.
Revenue rose 3.9 percent to $8.4 billion. Analysts had predicted revenue of $8.1 billion.
Sales were led by a 25 percent jump at Marine Systems to $2 billion. Combat Systems saw sales rise 1.4 percent to $1.6 billion and sales at Aerospace, which booked the most quarterly aircraft orders in three years, gained 4.9 percent to $2.2 billion. Sales dropped 8.3 percent to $2.5 billion at the Information Systems &Technology unit, which supplies defense communications equipment and services.
Operating margins, which measure profit from operations as a percentage of sales, rose to 12.8 percent for the quarter from 11.5 percent a year earlier.
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