• Revenue: $13.338 billion for Q4 2024, up 14.3% year-over-year.
• Earnings Per Share (EPS): $4.15 per diluted share for Q4 2024, up 14% year-over-year.
• Operating Earnings: $1.423 billion for Q4 2024, up 10.5% year-over-year.
• Net Earnings: $1.148 billion for Q4 2024, up 14.2% year-over-year.
• Aerospace Revenue: $3.7 billion for Q4 2024, up 36.4% year-over-year.
• Aerospace Earnings: $585 million for Q4 2024, up 30.3% year-over-year.
• Combat Systems Revenue: $2.4 billion for Q4 2024, with a 10 basis point margin improvement.
• Marine Systems Revenue: $4 billion for Q4 2024, up 16.2% year-over-year.
• Technologies Revenue: $3.24 billion for Q4 2024, up 2.8% year-over-year.
• Operating Cash Flow: $2.2 billion for Q4 2024, totaling $4.1 billion for the year.
• Free Cash Flow: $3.2 billion for 2024, with a cash conversion rate of 85%.
• Backlog: $90.6 billion at the end of 2024.
• Capital Expenditures: $916 million for 2024, 1.9% of sales.
• Share Repurchases: 5.4 million shares for $1.5 billion in 2024.
• Net Debt: $7.1 billion at the end of 2024, down approximately $300 million from last year.

• Warning! GuruFocus has detected 3 Warning Signs with GD.

Release Date: January 29, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• General Dynamics Corp (NYSE:GD) reported strong financial performance with a 14.3% increase in revenue and a 14% rise in earnings per diluted share for the fourth quarter.
• The aerospace segment showed significant growth, with a 36.4% increase in revenue and a 30.3% increase in earnings quarter-over-quarter.
• Combat systems achieved a book-to-bill ratio of 1.3:1, indicating robust order intake and a strong backlog of nearly $17 billion.
• Marine systems experienced impressive revenue growth of 16.2% year-over-year, driven by Columbia and Virginia class construction.
• Technologies segment had a record order activity with a total potential contract value increase of 18% to $48.1 billion, positioning it well for future growth.

Negative Points

• Aerospace segment faced challenges with delayed aircraft engine deliveries, leading to increased costs and schedule disruptions.
• Marine systems experienced a 7.8% decline in operating earnings for the quarter due to delays and quality issues in the submarine supply chain.
• The company did not meet its own expectations for aerospace deliveries, particularly with the G700 aircraft, impacting revenue and earnings.
• Working capital growth was noted due to delayed deliveries and production ramp-up, affecting cash conversion rates.
• Inflation and supply chain issues continue to pose challenges, particularly in the marine segment, impacting cost management and profitability.

Q & A Highlights

Q: Is there any impact on the certification and delivery of the G800 due to the issues with the G700, and do you receive any compensation from suppliers for delays? A: We expect the G800 certification in the first half of the year and have worked through significant issues experienced with the G700. The commonality between the G700 and G800 should help. We have negotiated some consideration with suppliers, but nothing material.

Q: How do you manage your business in a volatile environment with fluctuating army contracts? A: We focus on reacting to implemented realities rather than rumors. It's important to see how situations play out in defense actions and programs before making decisions.

Q: Can you comment on the demand trajectory for combat vehicles both in the US and internationally? A: Vehicle demand remains strong both nationally and internationally. We are executing on new and existing programs for both wheeled and tracked vehicles. The Stryker program was underfunded, and we are working to address this.

Q: How does the Navy's additional funding help resolve supply chain and inflation issues in marine systems? A: The Navy and Congress have been proactive in funding the industrial base to stabilize it. While there are improvements in some areas, challenges remain. The funding helps address cost challenges and productivity improvements, but more is needed to cover fact-of-life changes.

Q: What is the book-to-bill assumption for aerospace, and how does it affect working capital? A: We assume a 1:1 book-to-bill ratio. Working capital will build due to delayed deliveries and production ramp-up, but it is expected to unwind by the end of 2025.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.