Why Aerospace And Defense Giant General Dynamics Shares Are Shooting Higher Today

General Dynamics Corp GD reported fourth-quarter fiscal 2023 revenue growth of 7.5% year-over-year to $11.67 billion, beating the consensus of $11.37 billion. 

EPS of $3.64 (+1.7% Y/Y) missed the consensus of $3.68. Operating earnings rose 5% Y/Y to $1.29 billion, and the margin contracted by 30 bps to 11%.

Revenue by segments: Aerospace $2.74 billion (+12% Y/Y), Marine Systems $3.41 billion (+14.8% Y/Y), Combat Systems $2.36 billion (+8.5% Y/Y) and Technologies $3.15 billion (-3.1% Y/Y).

GD ended the quarter with a $93.6 billion backlog, the highest year-end backlog in the company’s history. The consolidated book-to-bill ratio was 0.8 to 1 for the quarter and 1.1-to-1 for the year.

In the Aerospace segment, orders in the quarter totaled $3.2 billion, up 4.8% YoY. Aerospace book-to-bill was 1.2-to-1 for the quarter and the year.

General Dynamics generated an operating cash flow of $4.71 billion for the fiscal, compared to $4.58 billion in 2022. Free cash flow was $3.81 billion for the year ended Dec. 31, 2023.

Net cash provided by operating activities in the quarter totaled $1.2 billion, or 119% of net earnings. The total estimated contract value, the sum of all backlog components, was $132 billion at the end of the year.

“Our Aerospace segment in particular saw solid execution and continued demand in the quarter and is well positioned for a surge in deliveries upon FAA certification of the G700,” commented Phebe N. Novakovic, chairman and chief executive officer. 

During the year, the company reduced debt by $1.2 billion, invested $904 million in capital expenditures, paid $1.4 billion in dividends, and used $434 million to repurchase shares, ending 2023 with $1.9 billion in cash and equivalents on hand.

In its conference call, General Dynamics said it expects capex to be 2%-2.5% of sales next year and closer to 2% thereafter.

Price Action: GD shares traded higher by 4.85% at $261.46 on the last check Wednesday.