By Pratyush Thakur and Mike Stone
(Reuters) -U.S. defense contractor General Dynamics’ third-quarter results beat Wall Street estimates on Wednesday, as demand for artillery and armored vehicles, driven in part by a need to restock supplies sent to Ukraine, helped offset higher costs.
The company benefited from Pentagon spending on replacing equipment that has been sent to Ukraine, like 155 millimeter artillery replacements, which have been essential to Ukraine’s ground strategy in repelling the Russian invasion.
Other weapons systems like combat vehicles such as Stryker as well as Abrams tanks have also been have sent to Ukraine and are slated to be backfilled.
Shares of the Reston, Virginia-based company rose 4.4% after it reported profit for the quarter of $3.04 per share, ahead of analyst estimates of $2.91, and a 6% rise in revenue to $10.57 billion, also beating estimates, according to LSEG data.
Artillery has “been a big pressure point up to now with Ukraine, one that we’ve been doing everything we can to support our (U.S.) Army customer,” Jason Aiken, General Dynamics’ chief financial officer, said.
Output has jumped from 14,000 rounds per month to 20,000, he added.
The company’s book-to-bill ratio, a comparison of orders received to units shipped and billed, was 1.4 to 1.
However, sales at the company’s aerospace unit, which makes Gulfstream business jets, slumped 13.4% as supply chain challenges made it harder to deliver planes.
Gulfstream made good on last quarter’s promise to deliver 27 jets, but that was much lower than the 35 jets delivered during the same period a year ago. So far this year 72 of the business jets have been delivered.
On a post earnings call with investors, Aiken said the company expected 135 to 137 deliveries in 2023, down from 139-140 in July.
A certification of G700 business jets will be essential for the company to make its deliveries.
“This could still be possible given 40 G700s are built and awaiting certification, and guidance (from management) of 19 G700s” to be built in the fourth quarter, Jefferies analyst Sheila Kahyaoglu wrote in a note on Wednesday.
“All in, including G700, we anticipate in excess of 60 deliveries in the (fourth) quarter, assuming we’re granted FAA certification before the end of the year,” Aiken said.
General Dynamics joined peer defense contractors Lockheed Martin and RTX in reporting better-than-expected quarterly results.
(Reporting by Pratyush Thakur in Bengaluru and Mike Stone in Washington; Editing by Krishna Chandra Eluri, Chizu Nomiyama and Jan Harvey)
