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Stock of the Day
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General Dynamics (GD)
General Dynamics Benefits from a Defense Heavy Quarter
General Dynamics managed to beat Wall Street profit expectations today, but it was somewhat of bitter-sweet victory for the industrial juggernaut. It became quite clear that even General Dynamics cannot escape the economic downturn that has been slicing through businesses these days. In order to produce its impressive profit bottom line, General Dynamics had to do a little "give and take". As a result, sales seesawed as product demand shifted. GD improved sales performance enough in one area that it offset the decline in another. What exactly are the details behind General Dynamics' crazy balancing act?
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| Daily Chart |
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| Stock Analysis |
Let's start with the bitter. General Dynamics has been suffering a steady decline in Gulfstream business jet demand. The current economy is forcing companies to cut back expenses, and business jet purchases seem to be getting the axe. General Dynamics' airplane sales slipped 18 percent while profit tumbled 56 percent. Gulfstream business jet demand declined so much that the company was forced to suspend production for five weeks in July and August. However, General Dynamics did indicate that it thought the Gulfstream jet market has finally bottomed out. Fortunately for the government contractor, the quarter was not all bitter.
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On the sweet side, General Dynamics saw promising performance from its defense-related business units. The combination of its Marine Systems, Combat Systems, and Information Systems & Technology segments managed to tip the profit scale back into positive territory. General Dynamics secured two huge deals that were instrumental in boosting performance. The Marine Systems was awarded a $160 million contract from the Navy to service its DDG-1000 destroyer program while the Combat Systems unit received a $950 million order to build the Army's armored vehicle, the Stryker. Both deals helped counter the floundering Gulfstream profit levels. Even with the U.S. Defense Department cutting back high technology spending, General Dynamics still anticipates a slow, steady growth with its defense-related business units.
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Overall, General Dynamics seems to be pleased with its quarter performance. It is true that the Gulfstream jet unit is struggling, but its defense-related businesses are performing very strong. Despite the government cutting back defense spending, General Dynamics remains optimistic about growth forecasts. Also, if the Gulfstream jet market has really bottomed out, General Dynamics can look forward to increased performance improvement. However, there are outside concerns that the business jet market is in worse shape than GD advertises. Honeywell International (HON: Charts, News, Offers), a jet manufacturer rival, believes that the market will continue to decline and has yet to bottom out. Regardless of which crystal ball you choose to look into, General Dynamics hopes to fly over the competition with improved Gulfstream jet sales and continued defense-related business success.
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Other Genreal Dynamics Related News
Stryker 8-Wheel Drive Armored Combat Vehicles -- What exactly is the Stryker armored vehicle?
General Dynamics Q3 Profit Falls, But Beats View; Forecast Raised -- Check out Dividend's bottom line analysis for GD stock shares.
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Other Stocks in the News
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Wyndham profit beats view; eyes brand acquisitions -- Wyndham (WYN: Charts, News, Offers) is looking to expand in anticipation for a recovering economy.
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Profile |
Click here to view a detailed profile of General Dynamics.
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