General Dynamics, parent company of Savannah-based Gulfstream Aerospace, on Wednesday reported a strong first quarter, with earnings, revenue and margins beating both Wall Street’s and the company’s own expectations.
On the heels of an extremely strong fourth quarter in 2014, Gulfstream delivered fewer planes in the first quarter of this year, with sales down $17 million — less than 1 percent — from the first quarter of 2014 and $132 million from the fourth quarter 2014.
“But aerospace earnings were up for the quarter,” said Phebe Novakovic, chairman and CEO of General Dynamics. “And the only decline we worry about is earnings.”
Aerospace operating margins for the first quarter were 20.4 percent, representing a new high for both Gulfstream and business aviation service provider Jet Aviation, Novakovic said.
“Following a strong fourth quarter, I’d say aerospace is off to a very good start this year,” she said.
Compared to the first quarter 2014, General Dynamics (NYSE: GD) as a whole experienced first-quarter revenues this year that are up 7.1 percent to $7.8 billion and earnings from continuous operations up 20 percent to $716 million.
“Overall, General Dynamics delivered a powerful first quarter,” Novakovic said. “As a result of impressive revenue growth and strong operating performance, we expanded operating earnings to more than $1 billion, a 17.5 percent increase.”
She described first-quarter aerospace activity levels as “careful.”
“We have plenty in the pipeline, but orders are slow to contract,” she said.
“It’s a pretty typical first quarter.”
Demand for the company’s flagship business jets, the G650 and the G650 ER, remains robust, with lead times out to the fourth quarter 2017, she said. Lead times for the G450 and G550, as well as the Israeli-made G280 and G150, are running about 12 months.
The company’s two new aircraft, the G500 and G600, are on track with the G500’s first test flight expected this quarter. The new aircraft were introduced at Gulfstream headquarters in Savannah in October, with the G500 prototype rolling up under its own power.
Initial delivery of the first G500 is projected for 2017, with entry into service in early 2018.
“We’re building the first prototype of the G600 now,” she said, adding that entry into service for both new models ultimately will be determined by the Federal Aviation Administration’s test program.
“They have a very important job to do,” Novakovic said.
With the G500 still more than two years away, Novakovic said she doesn’t necessarily expect strong revenue growth during the transition period.
“It will return when the new planes are delivered,” she said, adding that Gulfstream may increase its production of the G650 and G650 ER within that time.