General Dynamics Positive For 2009

General Dynamics (GD) joined Lockheed Martin (LMT) among the large defense contractors as reporting a profit for the most recent quarter. They did see a decline in earnings of almost ten percent though although revenue was up over eight. Unlike some of the other companies General Dynamics is positive that they will have a good year in 2009.

Despite the decline in quarterly profits the company raised their estimate for the year as a whole. The company feels that it is well placed to continue some growth over the next few years despite the shake outs in the U.S. defense budget overall. General Dynamics has only seen one major program re-structured by the Obama administration and that was the Littoral Combat Ship (LCS). They never did receive their order for a second one as planned, but there is an opportunity there as the Navy now plans to go with one supplier rather then two and General Dynamics could win that contract.

The company is also confident that its major civil aerospace investment, Gulfstream, will see a recovery. The executive jet market has taken a beating over the last two years as the global recession has driven down demand. In fact Gulfstream sales were down that the workers were furloughed for five weeks It is hoped that as the world’s economy recovers then that market will as well.

Like all of the U.S. defense contractors General Dynamics is looking to overseas markets as well. They make Stryker combat vehicles as well as heavy armored ones for the U.S. military and there are several foriegn deals percolating for those kind of systems.

Recent earnings for the five major defense contractors have been scattered. Boeing (BA) did the worst but that was due to their issues with civil aircraft production. Lockheed, General Dynamics, Northrop (NOC) and Raytheon (RTN) all saw profits with some being higher then the others. Not all of the companies retain that positive an outlook for 2010 and out.

Really without knowing the full contents of the 2011 and out year defense budget it will be hard to make more then general predictions. All of these defense contractors have diverse product lines and customers. The aerospace side of the business is the one that seems most likely to take a short term hit as the F-22 and C-17 end and the F-35 ramps up. NASA’s budget is also in limbo as the effects of the Augustine Commission and a possible re-orienting of that Agency occurs.

There are also opportunities in the next five to ten years for new programs. The Navy is planning to go ahead with some sort of helicopter acquisition for the Presidential transport mission. A new armored vehicle will have to be fielded to replace the Future Combat Systems (FCS) eventually. All of these decisions wait to be made.

2009 looks like it will end well overall, but 2010 will be a down year in general. 2011 and further is murky right now and will be until next February at the earliest when a five year budget is submitted to Congress.