The shares of General Dynamics (NYSE: GD) popped 4.03 percent to $242.40 on mid-week after the company reported a 6 percent year-over-year revenue growth in the third quarter of 2023 to $10.6 billion versus Q3 2022. Another business highlight was the $95.6 billion company-wide backlog, the highest ever in the defense contractor’s history. Net earnings for the quarter were $836 million, with diluted EPS of $3.04.
“We continue to see strong demand and steady revenue growth across the business, resulting in significant growth in backlog,” Phebe Novakovic, chairman and CEO of General Dynamics, said in a statement published Wednesday.
“Both operating earnings and net earnings increased over last quarter, and cash from operations was a highlight,” added the nine-time Wash100 awardee.
The net cash provided by operating activities reached $1.3 billion or 158 percent of net earnings, while free cash flow (net of capital expenditures) was nearly $1.1 billion.
General Dynamics’ record-high backlog indicates strong orders across the company. The consolidated book-to-bill ratio (orders divided by revenue) at the quarter’s end was 1.4-to-1, with the marine systems and aerospace segments showing great strength.
The estimated potential contract value is $37.3 billion, comprising management’s estimate of additional value in unfunded indefinite-delivery/indefinite-quantity contracts and unexercised options. The total estimated contract value, or the sum of all backlog components, was $132.9 billion.
During the conference call, Jason Aiken, executive vice president of technologies and chief financial officer, said, “We continue to have vibrant sales activity going into the fourth quarter and expect strong orders. It would, however, be a stretch to get to 1 to 1 in the fourth quarter, given our expectation of over 60 deliveries.”
Aiken notes the stunning 24.4 percent year-over-year revenue growth of combat systems to $2.22 billion and growth in each business unit. Notable mentions are ordnance and tactical systems and European land systems.
In summary, Aiken said, “We’re seeing more stable volumes across all three of the defense segments from first quarter to fourth quarter, whereas in the past they’ve risen from first to fourth, so a little bit of an aberration in the pattern.” Last, he expects growth in the defense business across all three segments going into 2024.
