Armored vehicles lift General Dynamics 2Q profit

Feeding the Pentagon's demand for armored vehicles helped drive up General Dynamics Corp.'s second quarter profit by 25 percent, lifting shares of the defense contractor, which also raised its outlook for the year on Wednesday.

General Dynamics' stock jumped nearly 7 percent, closing up $5.82 at $89.27 per share.

The Falls Church, Va.-based company earned $641 million, or $1.60 per share, in the latest quarter, compared with $513 million, or $1.26 per share, a year earlier. Excluding a 9-cent gain from a tax refund lawsuit settlement, earnings were $1.51 per share.

Analysts polled by Thomson Financial were expecting $1.44 cents per share in quarterly earnings from continuing operations on revenue of $7.23 billion.

Quarterly revenue rose nearly 11 percent to $7.30 billion.

Helped by expectations of a boom in sales for its corporate jets and continued business in heavily armored vehicles, General Dynamics significantly raised its 2008 earnings outlook. The company now expects a range of $6.00 to $6.05 per share. Previous company guidance was between $5.55 and $5.65 per share for 2008.

For the year, analysts expect General Dynamics to earn $5.91 per share on $29.65 billion in revenue.

"We have performed extremely well so far this year and built a backlog that positions us very well for the foreseeable future," CEO Nicholas Chabraja said Wednesday.

General Dynamics, which makes tanks, submarines, warships and Gulfstream private jets, has reaped big profits in recent quarters as the Pentagon scrambles to buy and replace equipment for wars in Iraq and Afghanistan.

The company is one of several contractors working on the mine resistant ambush protected vehicles, also known as MRAP, that are in high demand from military commanders to protect troops from roadside bombs. The Pentagon made the program its top weapons buying priority last year. The program is winding down, but last week the Marine Corps awarded General Dynamics a contract to built 773 MRAPs with a potential value of $552 million.

The company expects robust sales of its corporate jets in its Gulfstream subsidiary, primarily in overseas markets such as China and the Middle East. The company recorded a backlog of orders worth $18.8 billion, up from $10 billion in the second quarter of 2007.

It began taking orders earlier this year on its newest and widest ranging plane, the G650. Analysts believe about 100 orders have been placed, with roughly 500 letters of intent signed to buy the plane, figures Chabraja wouldn't confirm, but said weren't too far off.

Analyst Paul Nisbet of JSA Research said that if those numbers on G650 hold up, it could be a boon to Gulfstream's future sales.

"That would be huge at $55 million apiece," he said.

But the fate of a big ship building project remains unclear. Members of Maine's Congressional delegation said Tuesday the Navy has said it will build only two of the advanced DDG-1000 Zumwalt destroyers the service had planned for an upgrade of its fleet. The ship, being built at General Dynamics' Bath Iron Works subsidiary in Maine, proved costly, more than double the $1.3 billion cost of existing destroyers.

Chabraja said the company has not been notified by the Navy on the ship, but noted that "I believe what I am reading in the press reports about the Navy's posture."

Sales growth was highest in the company's combat systems division _ which makes MRAP vehicles and other war fighting tool _ rising 17.7 percent to $2 billion. The aerospace unit, made up of Gulfstream, saw sales grow 10 percent to $1.3 billion. Sales in information technology were up nearly 7 percent to $2.5 billion, and rose 9.6 percent to roughly $1.4 billion in marine systems.

For the first six months of the year, General Dynamics earned $1.2 billion, or $3.04 per share, on revenue of $14.3 billion.