General Dynamics Reports Strong Growth in Aerospace and Combat Divisions
2024-01-30
General Dynamics, a leading aerospace and defense company, held its Q4 2023 earnings call on January 24, 2024. The call was led by Phebe Novakovic, the Chairman and Chief Executive Officer, and Jason Aiken, the Executive Vice President, Technologies, and Chief Financial Officer. Nicole Shelton, the Vice President of Investor Relations, also played a key role in the call.
During the call, the company reported earnings per diluted share of $3.64 and revenue of $11.668 billion for the fourth quarter. This represented a 7.5% increase in revenue compared to the previous year's fourth quarter. The operating earnings for the quarter also saw a significant increase of $61 million.
One of the topics discussed during the call was the performance of Gulfstream, the company's business jet division. It was revealed that Gulfstream had a miss in consensus for its earnings release due to the G700 not certifying before year-end, which prevented the delivery of 15 G700 aircraft as anticipated. However, Gulfstream had a strong performance in terms of order activity and backlog in 2023, finishing the year with a total backlog of $93.6 billion.
The aerospace segment, which includes Gulfstream, also saw growth in revenue and earnings. The segment reported revenue of $2.74 billion and earnings of $449 million in the quarter, representing a 12% increase in revenue and a 33% increase in earnings on a quarter-over-quarter basis. The increase in operating earnings for the aerospace segment was attributed to factors such as increased delivery of in-service airplanes and a strong mix favoring large aircraft.
Combat, another division of General Dynamics, also had a strong performance in 2023. The division saw significant growth in revenue and earnings, with revenue up 13% and earnings up 6.7%. The growth in the marine systems group, a part of the combat division, was driven by factors such as Columbia-class construction and engineering volume, T-AO volume, and service contracts at Bath.
The technologies group, another division of General Dynamics, reported mixed results. While revenue for the quarter was down 3.1% compared to the prior year, revenue for the year was up 3.4%. Operating earnings for the quarter were also down 10.3% compared to the fourth quarter of 2022, but down only 2% for the full year.
The technologies group also had a strong performance in terms of order activity and backlog. GDIT, a part of the technologies group, received awards totaling $13.5 billion and has another $15 billion in awards pending adjudication. The combined qualified pipeline for the technologies group exceeds $130 billion.
Looking ahead, General Dynamics expects aerospace revenue to be around $12 billion in 2024, with Gulfstream deliveries expected to be around 160. The company also expects an operating margin of 15% for the aerospace segment in 2024. The company remains confident in the demand environment across all of its businesses and sees opportunities to improve operating margins.
In terms of the supply chain, General Dynamics faced temporary issues due to factors such as the mix of business, timing around the supply chain, and the impact on out-of-station work. However, the company saw improvements in the supply chain and expected increased production in the latter half of the year.
Overall, General Dynamics remained focused on operations and was committed to delivering on its backlog and pipeline. The company saw strong demand and a solid pipeline for orders and was confident in its ability to increase margins, earnings, and revenue over time.