Defense and aerospace operator
General Dynamics Corporation
(
GD
) announced second-quarter 2012 operating earnings of $1.77 per
share, which surpassed the Zacks Consensus Estimate of $1.74.
However, earnings missed the year-ago figure by 2 cents.
General Dynamic's GAAP earnings during the second quarter were
$1.77 per share versus $1.76 per share reported in the year-ago
quarter.
Total Revenue
General Dynamics generated total revenue of $7.92 billion in the
reported quarter versus $7.87 billion in the year-ago quarter,
reflecting growth of 0.5%. The year-over-year growth in revenue was
primarily attributable to positive contribution from its
Aerospace,
Marine Systems
and
Combat System
segments, partly offset by decline in the
Information Systems
and
Technology Aerospace
segments.
Reported quarter revenue was marginally ahead of the Zacks
Consensus Estimate of $7.91 billion by $7 million.
Segment Performance
The
Aerospace
segment reported revenue of $1.59 billion, up 15.7% from the
prior-year period. Operating income from this segment was $257
million versus $209 million a year ago.
Combat Systems
reported revenue of $2.14 billion, up 1.3% year over year.
Operating income from this segment was $322 million versus $299
million in the prior-year period. One of the significant orders
received during the quarter was a $270 million deal from the U.S.
Army for the production of Hydra-70 rockets.
Marine Systems
reported revenue of $1.65 billion, up 4.9% from the year-earlier
period. Operating income from this segment was $183 million versus
$161 million in the prior-year period.
Information Systems and Technology
reported revenue of $2.52 billion reflecting a decline of 9.9% from
the previous year. Operating income from this segment was $226
million versus $299 million in the prior-year period.
Financial Condition
Cash and cash equivalents as of July 1, 2012, were $2.54 billion
versus $2.64 billion as of December 31, 2011.
Capital expenditure in the first six months of 2012 increased by
$24 million to $176 million from $152 million in the comparable
period in 2011.
Outstanding long-term debts, as of July 1, 2012, were $2.9
billion, a decline from $3.9 billion as of December 31, 2012.
Debt-to-equity at the end of second quarter 2012 was 28.8% versus
22.8% at the end of second quarter 2011.
Cash flow from operating activities in the first six months of
2012 was $1.2 billion versus $1.07 billion in the comparable
year-ago period.
During the quarter the board of directors has officially
approved the buyback of 10 million shares from the open market.
Peer Update
Lockheed Martin Corporation
(
LMT
), which competes with General Dynamics, reported strong second
quarter 2012 earnings of $2.38 per share, surpassing both the Zacks
Consensus Estimate of $1.92 and year-ago earnings of $2.16 per
share.
Lockheed Martin reported quarterly net sales of $11.9 billion,
beating the Zacks Consensus Estimate of $11.3 billion and the
year-ago revenue of $11.5 billion. The company ended the quarter
with a backlog of $75.5 billion.
Guidance
General Dynamics showed caution while providing the 2012
earnings per share guidance. Since there is a possibility of award
delay in the Information Systems and Technology's tactical
communications business, the company has lowered its earnings
guidance range for 2012 to $7.00-$7.10 per share from $7.10-$7.20
per share earlier.
The total backlog of the company at the end of the second
quarter was $52.4 billion, down from the first quarter 2012 backlog
of $55.3 billion and the year-ago backlog of $57.1 billion.
Our View
General Dynamics posted convincing results on the back of strong
performance from its different business segments, with a minor drag
from Information & Technology. We appreciate the initiatives
taken by the company to increase shareholder value through buyback
of shares and payment of regular dividends.
However, like all defense majors, the future prospects of the
company is tied to the U.S. defense budget. With the
possibility of a cut in the defense budget, we presently retain a
Neutral outlook on the company.
Based in Falls Church, Virginia, General Dynamics along with its
units operates in business aviation, land and expeditionary combat
systems, armaments and munitions, shipbuilding and marine systems
as well as information systems and technologies. General Dynamics
currently retains a Zacks #3 Rank, which translates into a
short-term Hold rating.
GENL DYNAMICS (GD): Free Stock Analysis Report
LOCKHEED MARTIN (LMT): Free Stock Analysis
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