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WASHINGTON — General Dynamics Corp.'s second-quarter earnings edged down 3.6 percent from results that included one-time gains a year ago, but the defense contractor's profits still surpassed Wall Street expectations.
The Falls Church, Va.-based company also raised its outlook for 2009 on Wednesday by a nickel per share.
General Dynamics reported earnings of $618 million, or $1.60 per share, compared with $641 million, or $1.60 per share, a year ago. The year-ago results included a 9-cent per share gain from tax benefits.
Analysts polled by Thomson Reuters had expected a profit of $1.57 per share.
Revenue grew nearly 11 percent to $8.1 billion on higher sales in its divisions that make armored vehicles, tanks and submarines. That fell just shy of analysts' revenue forecasts of $8.13 billion.
General Dynamics now predicts 2009 earnings of $6.05 to $6.15 per share. Analysts expect a profit of $6.15 per share.
The higher outlook was based on its first-half performance and "our understanding of what the remainder of 2009 will bring," according to General Dynamics CEO Jay Johnson. The company's backlog of orders is now 22 percent higher than it was a year ago, standing at $67.6 billion. General Dynamics also increased its margins by 11.7 percent, as it was able to wring higher profits out of its operations.
The defense contractor has benefited recently from a strong Pentagon demand for equipment like heavily armored vehicles that can protect troops against roadside bombs. It also has big contracts to make submarines and warships for the Navy.
The company's division that makes military vehicles and armaments posted a 19 percent gain in sales to $2.4 billion, while its marine unit saw sales grow nearly 17 percent to $1.6 billion.
But a continuing soft spot is General Dynamic's Gulfstream business jet division, which has suffered along with the sharp fall in demand for the small jets used primarily by corporations. The recession has eroded company demand for the pricey planes and created a large glut of used jets that are for sale.
Sales at Gulfstream rose 6.5 percent to $1.4 billion, but the segment's profit fell 10 percent to $215 million. The number of aircraft the company delivered in the quarter slipped to 26 from 39 planes a year earlier.
Johnson said that despite the lower results, Gulfstream's orders and the broader business jet market seemed to be stabilizing.
"We're encouraged by what we are seeing," he said.
Analyst James McIlree of Collins Stewart said that Gulfstream continues to weigh on results despite the better-than-expected quarterly results.
"While Gulfstream appears to be bottoming, we think it's too early to call for a full recovery and see little evidence of near-term growth," he wrote in an investor note.
Shares of the defense contractor rose 81 cents, or 1.5 percent, to close at $54.55.
