How is General Dynamics (NYSE:GD) able to beat consensus earnings estimates by nearly 10% in the latest quarter when it has so many Wall Street experts following it? Raising a curious eyebrow is understandable, but it's ultimately just the net effect of notably strong sales and strengthening margins playing out on the bottom line.
Meanwhile, the stock market raised more than just an eyebrow -- General Dynamics' stock has climbed by roughly 8% in recent trading. Investors are excited by what CEO Nicholas Chabraja has described as an "almost perfect execution across the board" in which his company achieved top-line growth of 16% compared with the same period a year ago.
For its fiscal first quarter, General Dynamics noted that it witnessed "meaningful growth in all areas" of its business. Chabraja pointed to its Combat Systems unit, which includes Abram tanks and Stryker vehicles, as a particular area of robust growth. With a revenue increase of 29.5%, this division achieved the highest growth of the company's four segments. General Dynamics' Aerospace unit, which primarily produces Gulfstream aircraft, also did well in increasing sales by 23.4%. Additionally, Information Systems, the company's highest revenue-producer, achieved double-digit growth in growing sales by 12.6%.
Beyond strong top-line growth, profit margins performed well in three of the four core business segments, while the remaining segment was relatively flat year over year. Marine Systems is worth noting -- it achieved a 360-basis-point bump on operating margins compared with the same period a year ago, an improvement that management attributed to bringing on new leadership for the division. As for the other two segments, Aerospace witnessed a 220-basis-point increase, and Combat Systems improved by 90 basis points. Even more Foolish, investors have to like the sound of free cash flow growing by 28% year over year.
General Dynamics has been a solid and steady performer over the decades, and the latest results only add to its performance legacy. As its revenue stream continues to broaden into more international markets -- an area that now makes up roughly a third of net sales -- shareholders have to like the prospects of continued success going forward.
Arm yourself with related Foolishness:
- Applied Signal (NASDAQ:APSG) suffered a revenue shortfall in the latest period.
- Is Boeing (NYSE:BA) still flying high with its new aircraft design?
- And Lockheed Martin (NYSE:LMT) appears to be getting bombed by its own jet-fighter concept.
Fool contributor Jeremy MacNealy does not own shares of any companies mentioned.
