General Dynamics Reports Mixed Q2 Results Amid Supply Chain Issues

General Dynamics' second-quarter revenue exceeded Wall Street estimates, but profit slightly missed due to supply chain issues affecting deliveries of high-end jets. Despite a 50% increase in business jet deliveries, the company only delivered 11 G700 jets. Defense revenue rose, aided by higher demand for military equipment.

General Dynamics posted second-quarter revenue above Wall Street expectations on Wednesday, although its profit fell short, and fewer high-end jets were delivered than anticipated. This led to a 5% drop in its share price. Business jet deliveries surged 50% during the quarter, yet only 11 top-tier G700 jets were handed over, missing the company's target of 15.

The U.S. Federal Aviation Administration had certified the G700 jets only days before the quarter began, but ongoing supply chain issues delayed their delivery. Analyst firm TD Cowen noted in a report that the earnings per share miss was largely due to shortfalls at Gulfstream, overshadowing strong defense results, and expressed investor disappointment.

General Dynamics reported an 18% increase in second-quarter revenue, fueled by higher demand for ammunition and nuclear submarines. CEO Phebe Novakovic stated that the pace of G700 deliveries is increasing, and defense business growth mirrors rising demand due to security threats.

Cost pressures from constraints on the U.S. defense budget have not dampened strong demand for military equipment amid global geopolitical tensions. The combat systems unit, which manufactures vehicles and tanks, saw quarterly profits rise by 25% to $313 million.

Annual revenue projections for combat systems are now set at $8.7 billion, up $200 million from earlier forecasts. Forecasts for the marine systems segment, which constructs nuclear-powered submarines and ships, were also raised by $1 billion to $13.4 billion-$13.8 billion.

Quarterly earnings were reported at $3.26 per share, missing analysts' expectations by one cent, although revenue was $11.98 billion, far exceeding the $11.44 billion analyst estimate, according to LSEG data. Full-year revenue projections are now $47.8 billion to $48.2 billion, up from a previous range of $46.6 billion to $46.7 billion.

General Dynamics shares fell 4.6% to $280.80 in midday trading. Recent Ukraine and Israel aid bills passed by Congress, totaling $95 billion, are anticipated to boost order backlogs for companies like General Dynamics.

Other significant defense contractors such as Lockheed Martin, RTX Corp, and Northrop Grumman are also expected to benefit from these funds eventually.

(With inputs from agencies.)