Summary
General Dynamics Corporation (GD) reported solid financial results for the second quarter and first half of 2018, marked by significant revenue growth driven by the acquisition of CSRA Inc. Total revenue increased by 19.7% to $9.2 billion for the quarter and 10.6% to $16.7 billion for the first half. This growth was primarily fueled by the Information Technology segment, which saw a substantial revenue boost from the CSRA acquisition. The defense segments also contributed positively with increased volume in Combat Systems, Marine Systems, and Mission Systems, offsetting a decline in the Aerospace segment due to fewer aircraft deliveries. Despite the top-line growth, operating earnings saw a modest increase of 2.0% for the quarter and a slight decrease of 0.8% for the first half, resulting in lower operating margins. This compression was largely attributable to higher operating costs and expenses, including intangible asset amortization and transaction-related charges associated with the CSRA acquisition. However, the company's strong backlog of $66.3 billion and a robust pipeline of potential contracts signal continued demand across its diverse portfolio. GD also continued its commitment to shareholders through dividend increases and share repurchases.
Financial Highlights
52 data points| Revenue | $9.09B |
| Cost of Revenue | $7.41B |
| Gross Profit | $1.69B |
| Operating Expenses | $7.96B |
| Operating Income | $1.14B |
| Net Income | $851.00M |
| EPS (Basic) | $2.88 |
| EPS (Diluted) | $2.85 |
| Shares Outstanding (Basic) | 295.34M |
| Shares Outstanding (Diluted) | 299.09M |
Key Highlights
- 1Revenue increased by 19.7% to $9.2 billion in Q2 2018 and 10.6% to $16.7 billion in the first half, largely due to the acquisition of CSRA Inc.
- 2The Information Technology segment's revenue surged by 132.1% in Q2 and 69.7% in the first half, primarily driven by the CSRA acquisition.
- 3Operating earnings increased slightly by 2.0% to $1.1 billion in Q2 but decreased by 0.8% to $2.1 billion in the first half, reflecting lower operating margins.
- 4The company ended the period with a substantial backlog of $66.3 billion, indicating strong future revenue potential.
- 5Free cash flow from operations significantly decreased to $12 million in the first half of 2018 from $857 million in the prior year, impacted by working capital changes and the CSRA acquisition.
- 6Long-term debt increased substantially to $11.4 billion from $4.0 billion, primarily to finance the CSRA acquisition.
- 7The effective tax rate decreased to 17.9% in the first six months of 2018 from 26% in the prior year, largely due to the Tax Cuts and Jobs Act.