General Dynamics Corporation (GD) announced fourth-quarter 2014 earnings from continuing operations of $2.19 per share on a diluted basis, comfortably surpassing the Zacks Consensus Estimate of $2.10 by 4.3%. Earnings also increased 24.4% from the prior-year figure of $1.76, backed by improved operating margins.
Full year earnings from continuing operations came in at $7.83 per share, surpassing the Street consensus of $7.75 and improving 11.4% year over year.
Total Revenue
In the fourth quarter, General Dynamics’ total revenues of $8,362 million beat the Zacks Consensus Estimate of $8,046 million by 3.9%. Total revenues were also up 3.9% from $8,047 million in the year-ago quarter.
The year-over-year increase was due to higher contribution from the Aerospace, Combat Systems and Marine Systems segments, partially offset by lower sales from the Information Systems and Technology segment.
Full year 2014 revenues, however, decreased marginally by 0.3% year over year to $30,852 million. Yet, the reported figure beat the Zacks Consensus Estimate of $30,586 million.
Segment Performance
Aerospace: The segment reported fourth-quarter 2014 revenues of $2,240 million, up 4.9% year over year. Operating income was $412 million, reflecting an increase of 18.4% from $348 million in the year-ago quarter.
Combat Systems: Segmental revenues increased 1.4% year over year to $1,614 million. Operating income from this segment was $271 million, up 8.4% from $250 million in the prior year.
Marine Systems: The segment’s revenues of $2,040 million were 25.2% higher than $1,630 million a year ago. Operating income from the segment surged 21.4% year over year to $193 million.
Information Systems and Technology: The segment reported revenues of $2,468 million, declining 8.3% from the year-ago quarter. Operating income, however, was up 8.2% year over year to $212 million.
Operational Highlights
In the quarter under review, General Dynamics’ operating costs and expenses increased 2.4% year over year to $7,295 million.
The company’s interest expenses however decreased 17.4% year over year to $19 million.
Total backlog at the end of fourth quarter 2014 was $72,410 million, up 57.8% year over year primarily due to higher backlog at Combat Systems and Marine Systems.
Financial Condition
As of Dec 31, 2014, General Dynamics’ cash and cash equivalents were $4,388 million compared with $5,301 million as of Dec 31, 2013.
Long-term debt as of Dec 31, 2014, was $3,410 million, down from $3,908 million as of Dec 31, 2013.
During 2014, the company’s cash flow from operating activities was around $3,728 million compared with $3,111 million in the year-ago period. Free cash flow from operations in 2014 was $1,389 million, down from $2,675 million in the prior year.
Other Releases
Yesterday, Pentagon’s prime contractor, Lockheed Martin Corp. (LMT), posted fourth-quarter 2014 adjusted quarterly earnings of $3.01 per share, comfortably surpassing the Zacks Consensus Estimate of $2.81 by 7.1%. Earnings in the reported quarter also rose 26.5% from $2.38 per share in the year-ago quarter, led by strong operational performance and higher fighter jet demand.
Rockwell Collins Inc. (COL) reported results for first-quarter fiscal 2015 ending Dec 31, 2014. The company’s adjusted first-quarter earnings per share of $1.10 missed the Zacks Consensus Estimate by 1.8%. Earnings, however, improved 14.6% year over year.
Aerospace giant The Boeing Company (BA) delivered stellar fourth-quarter 2014 results backed by robust deliveries. The company reported adjusted fourth-quarter 2014 earnings of $2.31 per share, beating the Zacks Consensus Estimate of $2.07 by 11.6%. The quarterly number rose an impressive 22.9% from $1.88 per share a year ago.
Our View
General Dynamics’ fourth-quarter earnings were well supported by its cost control efforts and strong financials, which in turn helped the company beat Street estimates.
A sharp rise in backlog backed by a significant improvement at the Combat Systems and Marine Systems segments is expected to boost General Dynamics’ forthcoming results.
General Dynamics currently has a Zacks Rank #3 (Hold).
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