(Updates shares in last paragraph.)
Oct. 26 (Bloomberg) -- General Dynamics Corp., maker of Gulfstream business jets and Abrams tanks, said third-quarter profit rose 2.5 percent as sales of aircraft and combat vehicles increased.
Profit from continuing operations advanced to $665 million, or $1.83 a share, from $649 million, or $1.70, the Falls Church, Virginia-based company said today in a statement. Analysts had predicted $1.77 a share, the average of estimates compiled by Bloomberg.
Chief Executive Officer Jay Johnson said today that he forecasts full-year profit “at the high end” of the $7.15 to $7.20 per share range. Analysts are forecasting $7.19 per share, the average of 23 estimates compiled by Bloomberg.
“As we plan for 2012, the defense market is shrouded by the uncertainty” of Pentagon funding, Johnson said in an earnings conference call. Congress has not yet approved a Pentagon budget for fiscal year 2012, which started Oct. 1, and a special congressional committee has been tasked with finding ways to trim government spending by at least $1.2 trillion.
“It’s clear that defense spending will be part of addressing our nation’s economic problems,” Johnson said. “The manner and degree to which cuts are made will dictate how they impact our industry.”
Total sales declined 2 percent to $7.85 billion. General Dynamics had about $2.16 billion in cash on hand for the quarter ending July 3.
“This was another good operating performance from General Dynamics, with margins offsetting some top-line weakness,” Robert Stallard, a New York-based analyst for RBC Capital Markets, wrote in a note to clients today. “Gulfstream backlog continues to grow, and it looks like the G650 is still on track.” He has an “outperform” rating on the stock.
Sales at the Aerospace unit, the maker of Gulfstream jets, rose 9.4 percent to $1.41 billion from $1.29 billion the year before. Profit at the unit rose 9 percent to $217 million from $199 million.
General Dynamics’ Gulfstream unit is adding new models as demand for business jets starts to rebound, according to unit President Larry Flynn. Gulfstream expects to boost deliveries about 10 percent this year and more than 15 percent next year as the long-range G650 enters service, Flynn said in a recent interview.
General Dynamics expects provisional certification for the G650 in the “next several weeks,” Johnson said today.
For the G280 jet, the company anticipates Israeli certification by the end of the year. U.S. Federal Aviation Administration certification is expected to slip into the first part of 2012, according to Johnson.
During the quarter the Aerospace unit received an order for 20 Gulfstream aircraft, worth $810 million, from Minsheng Financial Leasing, a Chinese aviation leasing company.
Sales at the Combat Systems unit, which manufactures Abrams tanks and Stryker vehicles, rose 3.4 percent to $2.14 billion.
Profit rose 2.6 percent to $319 million. General Dynamics during the quarter was awarded $440 million for the technology development phase of the U.S. Army’s new ground combat vehicle program.
The Army also awarded General Dynamics $250 million to produce 115 Stryker vehicles with a double V-shaped hull to protect against roadside bombs, the company said in its earnings statement today.
In addition, General Dynamics received an order from the Canadian government to upgrade the Canadian Army’s fleet of LAV III combat vehicles. The order was valued at $1.05 billion.
The Marine Systems and Information Systems and Technology units had a decline in revenue and reported an increase in profit.
Revenue at the Marine Systems unit, which builds nuclear- powered submarines and Navy destroyers, fell 4.6 percent to $1.62 billion, while profit rose 2.4 percent to $173 million. During the quarter, the unit received a $1.8 billion order from the U.S. Navy for the engineering, design and construction of two DDG-1000 destroyers, which are scheduled for delivery in 2015 and 2018.
Information unit sales fell 9.2 percent to $2.68 billion and profit rose 1.3 percent to $310 million, the company said in its statement today.
Johnson has said that acquisitions are “very important” to General Dynamics, both to expand its current portfolio and to fill gaps.
General Dynamics on Sept. 30 completed the acquisition of Vangent Holding Corp., the parent company of Vangent Inc., a health-care information technology provider to the federal government. The cash transaction was valued at about $960 million.
It announced on Sept. 21 that it had bought privately held, 400-employee Metro Machine Corp., an East Coast surface-ship repair company that supports the Navy’s fleet in Norfolk, Virginia. The government approved the deal on Oct. 19. General Dynamics did not disclose the value of the cash transaction.
The company said it expects both acquisitions to be “accretive” to the company’s earnings beginning in 2012.
General Dynamics fell $1.37, or 2.1 percent, to $63.89.
--With assistance from Susanna Ray in Seattle. Editors: Steven Komarow, Leslie Hoffecker
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