(Updates with comment by analyst in fourth paragraph.)
Jan. 25 (Bloomberg) -- General Dynamics Corp., the maker of Abrams battle tanks and Gulfstream business aircraft, said fourth-quarter profit fell 17.3 percent because of charges at a unit that outfits and overhauls business jets.
Net income fell to $603 million, or $1.68 a share, from $729 million, or $1.91 a share, a year earlier, the company said today in a statement. It missed the profit estimate of $1.99 a share, the average of 23 analysts surveyed by Bloomberg. Sales rose 6.3 percent to $9.15 billion.
General Dynamics said the quarter’s earnings were reduced by charges of $189 million at the company’s Switzerland-based Jet Aviation unit, which maintains and refurbishes business jets other than the company’s own Gulfstream aircraft.
“General Dynamics has an excellent track record for execution, so a charge of this magnitude will weigh on investors’ minds today,” Joel Levington, a bond analyst at Brookfield Investment Management Inc. in New York, said in an e- mail.
Jet Aviation’s aircraft-completions business “continued to face” lower business-jet volume and “delays in several narrow- body and wide-body aircraft which are nearing delivery,” General Dynamics chairman and chief executive officer Jay Johnson said in the statement.
The company’s defense business, which provided about 82 percent of its revenue last year, may be at risk because it is more dependent on Army programs than its peers as U.S. defense spending declines, Douglas Harned, an analyst at Sanford C. Bernstein LLC in New York, wrote in a Jan. 20 note to clients. Harned rates the stock market-perform.
The Pentagon must cut about $490 billion from its planned spending over the next 10 years under budget-reduction legislation, and possibly as much as $1 trillion.
To counter the Pentagon’s budget reductions, Johnson has said he has stepped up acquisitions to expand the company’s reach beyond defense and aerospace.
In September, the Falls Church, Virginia-based company spent $960 million to acquire Vangent Inc., a provider of health-care information technology services. In December, General Dynamics bought Force Protection Inc., a maker of mine- clearing vehicles and armored trucks, in a deal valued at $360 million.
Sales at the Aerospace unit, which makes Gulfstream jets and also includes Jet Aviation, rose 47 percent to $1.86 billion, while income fell 65 percent to $73 million.
Gulfstream deliveries of so-called green, or unfinished, airplanes rose 75 percent, to 35 units, during the quarter compared with the same period last year, the company said.
Revenue at the Marine Systems unit, which builds nuclear- powered submarine and U.S. Navy destroyers, rose 3.4 percent to $1.76 billion. Profit rose 7.3 percent to $190 million. The unit received a $280 million order from the U.S. Navy to convert nuclear submarines into training platforms.
Revenue at the Combat Systems unit, which manufactures Abrams tanks and Stryker vehicles, fell 3.2 percent to $2.6 billion, and profit fell 3 percent to $388 million. The unit received a $950 million order from Canada to upgrade that country’s fleet of LAV III light armored vehicles.
Sales at the Information Systems and Technology unit fell 0.5 percent to $2.9 billion, and profit rose 1.3 percent to $315 million.
General Dynamics fell 40 cents to $71.34 yesterday in New York trading and lost 1.9 percent in the 12 months before today.
--Editors: Larry Liebert, Terry Atlas
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