General Dynamics earnings edge higher

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COLLEGE PARK, Md. (AP) -Dynamics reported slightly higher fourth-quarter earnings Wednesday as a charge from the planned sale of a coal mining unit dampened higher revenue in the company’s core military hardware and other businesses.

The company that makes tanks, private jets and submarines missed analyst expectations for the quarter and issued 2007 guidance below Wall Street predictions, causing its share price to fall more than 3 percent before recovering a bit.

In Maine, the company owns Bath Iron Works shipbuilder and a General Dynamics Armament and Technical Products plant in Saco.

General Dynamics said income rose to $408 million, or $1 per share, versus $406 million, or $1 per share, a year earlier.

Earnings from continuing operations, which excludes the effect of the planned coal mining sale, rose 16 percent to $463 million, or $1.13 per share.

That was a penny a share short of the average analyst estimate of $1.14 per share, according to a Thomson Financial poll.

The analysts’ estimates typically exclude one-time items.

The Falls Church, Va.-based company did not specify how much the coal operation affected earnings, but it booked $55 million of loss from discontinued operations on its balance sheet. General Dynamics owns three coal mines in Illinois.

Sales rose 13 percent to $6.51 billion from $5.76 billion last year, but fell short of Wall Street estimates for $6.63 billion.

“It was a solid conclusion to a very good year,” company CEO Nicholas Chabraja said of the fourth quarter.

However, his earnings and revenue forecasts for 2007 were below Wall Street predictions. Chabraja said he expected General Dynamics to earn $4.60 per share this year on revenue of $26.3 billion. In the first quarter, the company should earn $1.02 per share. Analysts predict 2007 earnings of $4.76 per share and revenue of $26.83 billion.

In a conference call with analysts, Chabraja noted the lower company forecasts, but said the “vagaries” of future funding in President Bush’s forthcoming supplemental defense spending request and 2008 budget make it hard to raise that outlook.

“We do not have great clarity into the supplemental,” he said.

Wall Street is generally bullish on defense contractors, expecting that the supplemental and budget will include large amounts for defense procurement. General Dynamics is expected to be one of the biggest benefactors as the Army seeks to replace worn out equipment used in Iraq.

“It was a good quarter, it’s just the guidance was very light compared to what was anticipated,” said Paul Nisbet, a defense analyst at JSA Research.

Shares of General Dynamics fell $1.04, or 1.29 percent, to close at $79.85 on the New York Stock Exchange. The company’s stock has ranged between $56.77 and $81.28 over the past 52 weeks.

For the year, net income rose 26 percent to $1.86 billion, or $4.56 per share, from $1.46 billion, or $3.61 a share, a year ago. Revenue rose 15 percent to $24.1 billion from $20.98 billion a year ago.

The company’s information systems and technology division saw revenue grow to $2.5 billion in the fourth quarter, up 20 percent from $2 billion in the fourth quarter of 2005. The combat systems division, which makes tanks, armored personnel carriers and other equipment primarily for the U.S. Army, posted a 12 percent increase to $1.8 billion.

General Dynamics’ marine systems unit posted the smallest revenue increase, 3 percent, to $1.2 billion. The company’s Electric Boat unit said in December that it plans to shed 1,000 workers, or about 10 percent of its work force, by the end of the year due to a decline in work. Based in Connecticut, Electric Boat makes military submarines.

Chabraja said much of the quarterly growth came at Gulfstream, which saw growing sales due to greater demand for private jets overseas in places like Russia. While the IT segment posted the biggest percentage increase, much of that was related to the company’s recent acquisitions, not organic growth, he said.

AP-ES-01-24-07 1735EST

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