General Dynamics Posts Strong Earnings Ahead of UAW Contract Vote. Stock Rises.

Wall Street was looking for profit of $2.91 a share from sales of $10 billion. In the third quarter of 2022, General Dynamics reported earnings of $3.26 a share from sales of just under $10 billion.

“We continue to see strong demand and steady revenue growth across the business, resulting in significant growth in backlog,” said CEO Phebe Novakovic in a news release. “Both operating earnings and net earnings increased over last quarter, and cash from operations was a highlight.”

Cash from operations totaled about $1.3 billion. Wall Street was looking for about $1 billion.

Business backlog also was a highlight, setting a record at almost $96 billion.

General Dynamics shares were up 2.4% in premarket trading.
S&P 500
futures were down about 0.3%.
Dow Jones Industrial Average
futures rose 0.2%.

Shares have risen about 6% since Oct. 6, the Friday before Hamas terrorists attacked Israel. That event sent shares of all defense stocks higher.

Along with a large defense business, General Dynamics also makes business jets. “Still no sign of that bizjet downturn, in fact, the Aerospace book-to-bill expanded in the quarter to 1.4 times, though the dip in deliveries partially helped,” wrote Vertical Research Partners analyst Rob Stallard in a research report Wednesday. More orders than deliveries drive book-to-bill ratios above one.

“With good growth in combat and better-than-expected cash flow we view this as a sound operating quarter from [the company],” added Stallard. “We’ll see what comes up on the conference call this morning, but we would expect a modest improvement to the 2023 EPS guidance.”

The company will host a conference call at 9 a.m. Eastern time to discuss results.

The current guidance range for 2023 EPS is $12.60 to $12.65. Wall Street is currently projecting $12.59 a share, according to FactSet. General Dynamics has reported about $8.40 a share in the first three months of the year, leaving about $4.20 to hit Wall Street’s full-year number. Currently, Wall Street is looking for $4.33 in the fourth quarter.

Along with guidance and business updates, investors will be waiting to see if employees represented by the United Auto Workers ratified a new labor deal reached by the company and union negotiators. The tentative agreement includes wage increases totaling about 14% over four years. Inflation protection is also a feature of the new deal.

Coming into Wednesday trading, General Dynamics shares were down about 5% over the past 12 months. Before the recent rise in global conflict, U.S. government deficits and shutdowns were weighing on investor sentiment toward defense stocks.

Write to Al Root at [email protected]