General Dynamics Q3: Revenues up, cash flow down, orders stay strong


General Dynamics (GD), Gulfstream’s parent, has posted a solid third quarter (Q3) including an aerospace book-to-bill ratio of 1.15 to 1. 

The firm reported revenues of $10bn in Q3 2022 bringing net earnings to $902m. Diluted earnings per share (EPS) were $3.26, a 6.2% increase from the same quarter last year. EPS was up against both Jefferies’ ($3.14) and Vertical Research Partners’ ($3.12) predictions. 

Phebe N. Novakovic, chairman and CEO said: “We saw continued strong demand in the quarter, particularly in Aerospace, Combat Systems and Marine Systems. Our businesses delivered solid operating performance and cash flow even as they managed through the challenges of inflation and supply chain constraints.”

Cashflow was stronger in the quarter — 114% of net income — helped by another strong order performance in its aerospace segment. The group book to bill was 1.1 to 1. Net cash provided by operating activities in Q3 totalled $1.3bn, or 142% of net earnings. After $255m in capital expenditures, the firm generated free cash flow of $1bn.

The aerospace backlog grew in the quarter to $19.1bn, up 1.4% from Q2 and 29.7% from Q3 2021.

There is still no sign of that much feared business jet downturn at GD, according to Vertical Research Partners. Two of its three defense divisions posted year-on-year revenue growth in the quarter despite the industry wide supply chain difficulties. 

“While the Aero book to bill has come in from the stratospheric levels of earlier this year, the backlog in this division was still up sequentially (+1.4%), even as deliveries ticked higher. We’ll see what management has to say on the call, but there is clearly upward pressure on the current 2022 forecasts, particularly for cashflow. We would expect there to be a positive response to these results,” reported Vertical Research Partners. 

GD rose 1.5% in premarket trading this morning after its latest earnings beat estimates.