General Dynamics profit misses estimates as pandemic delays Gulfstream deliveries

(Reuters) – Defense contractor General Dynamics Corp GD.N missed Wall Street estimates for quarterly profit on Wednesday as travel restrictions linked to the new coronavirus pandemic delayed deliveries of its Gulfstream business jets.

Shares were flat on Wednesday as the company flagged a $549 million (441.42 million pounds) decline in revenue at its aerospace segment, with Gulfstream deliveries totaling 23 jets in the first quarter, down from 34 a year earlier.

“For the year, we had anticipated delivery of somewhat in excess of 150 aircraft. It now appears that we will be between 125 and 130 deliveries,” Chief Executive Phebe Novakovic said on a post earnings call with analysts.

She said that the supply chain had slowed its production and there was a shutdown of at a Gulfstream facility in the midst of the pandemic.

Revenue at its aerospace unit fell 24.5% to $1.69 billion. Profit margins at the unit also fell slightly.

Earnings per share for the year are now expected to be between $11.30 and $11.40, Novakovic said on the call. In January the company forecast 2020 earnings per share of between $12.55 and $12.60.

During the quarter, the company issued bonds and boosted its cash position to more than $5 billion, up from just under a billion.

Defense contractors like General Dynamics are expected to see much less disruption linked to the outbreak of the coronavirus as most of their revenue is from government contracts, which are considered to be reliable as governments are unlikely to reduce spending during the pandemic.

The Pentagon, General Dynamics’ biggest customer, increased interim payments to defense contractors and is also paying for sick time for quarantined employees, which is expected to buoy the defense industry as the pandemic affects the economy.

During the quarter, the company’s Combat Systems business unit, which makes tanks, was awarded a $300 million contract from the U.S. Army to upgrade its M1A2 Abrams tanks. The unit saw revenue up 4.4% over the same quarter a year earlier.

The U.S. Navy awarded General Dynamics a contract worth $875 million for refueling ships during the quarter. The Marine Systems unit, which makes ships and submarines for the U.S. Navy, saw revenue up 9.1% from the same period last year.

Net earnings fell to $706 million, or $2.43 per share, in the first quarter ended March 29, from $745 million, or $2.56 per share, a year earlier.

Analysts, on average, expected the company to post a profit per share of $2.57, according to IBES data from Refinitiv.

Revenue fell 5.5% to $8.75 billion.