General Dynamics Earnings: Beating Estimates and the Potential for Growth

Here's what investors need to know about General Dynamics' fourth quarter, and what to watch for in the year ahead.

Jan 22, 2014 at 1:00PM

What: On Wednesday, General Dynamics (NYSE:GD) reported its 2013 fourth-quarter results, beating estimates on earnings and revenue. Starting from the top, revenues for the fourth quarter totaled $8.1 billion. On the bottom, General Dynamics' earnings from continuing operations totaled $624 million, or $1.76 per share on a fully diluted basis -- ahead of Thomson Reuter's estimates of $1.75 per share.

For the full year, 2013 revenues totaled $31.2 billion and earnings from continuing operations totaled $2.5 billion, or $7.03 per share.

What you need to know: Net earnings for the fourth quarter came in at $495 million, or $1.40 per share fully diluted, due to a $129 million loss in discontinued operations related to the A-12 litigation settlement. When that's included into the full-year report, net earnings for 2013 dropped to $2.4 billion, or $6.67 per share fully diluted.

For full-year 2013, company margins checked in at 11.8%, increasing over 2012 margins of 2.6% (a low mark due to General Dynamics' information systems and technology segment). Two strong points of improvement are its aerospace and combat systems segments, which improved from 12.4% and 8.3% to 17.4% and 14.8%, respectively, from 2012 to 2013.

Another good sign for General Dynamics is that its total backlog of orders was at $46 billion at the end of 2013. Here's where it can get a little tricky because the government works with "indefinite delivery, indefinite quantity", or IDIQ, contracts, which essentially means that the government can only guarantee a minimum purchase order, yet often the value of the entire contract exceeds that guaranteed minimum amount. When you consider management's estimation of its potential value including IDIQ contracts, the sum of all backlog components soars to $73.6 billion at the end of last year. That's more than double the amount of revenue generated in 2013.

"General Dynamics performed well in 2013, reflecting our continued focus on operations, cost management, cash generation and our commitment to meeting our customers' requirements," said Phebe N. Novakovic, chairman and CEO, in a press release. "As promised, we managed our company prudently, adjusting our business to reflect the realities of the current defense spending environment and retiring risk throughout the organization."

What to watch: The biggest thing to watch will be if General Dynamics' growth in its aerospace segment, which includes a full lineup of business jets, can offset the potential losses in combat and marine systems as the Department of Defense cuts budget spending by nearly $1 trillion until 2021. Last year's results give investors reason to believe that the company can do so, considering that operating earnings in the aerospace segment surged 65%. Also, the company owns almost 30% of the ex-light-jet market, and growth in this part of the aerospace segment will likely come from its two recent product introductions: the G280 and G650.

Ultimately, General Dynamics' products play an important role for the U.S. military, a fact that should help lessen the blow from inevitable defense budget cuts, and its continuing growth in aerospace should be more than enough to keep the company on a more profitable path. 

America's $2.89 trillion superweapon revealed
U.S. News & World Report says this "Will drive the U.S. economy." And Business Insider calls it "The growth force of our time." In a special report entitled "America's $2.89 Trillion Superweapon Revealed" you'll learn specific steps you can take to capitalize on this massive growth opportunity. But act now, because this is your shot to cash in before the fat cats on Wall Street beat you to the potentially life-changing profits. Click here now for instant access to this free report.





Fool contributor Daniel Miller has no position in any stocks mentioned. The Motley Fool owns shares of General Dynamics. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information