General Dynamics said July 24 its second-quarter net income fell 3 percent, and the defense contractor cut its 2012 profit prediction due to contract delays in its IT business.
The entire defense industry is under a cloud because of the potential for big military spending cuts in January. The cuts, which will be automatic unless Congress agrees to an alternative for cutting the deficit, would slash $492 billion from military budgets over a decade. The government would also cut domestic spending by $492 billion over 10 years.
The Falls Church, Va., company earned $634 million in the April-June period, down from $653 million a year ago. On a per-share basis, profit rose to $1.77 from $1.76 because the company had less stock outstanding, which boosts the value of each individual share.
Analysts expected a profit of $1.74 per share, according to a FactSet poll.
Revenue rose less than 1 percent to $7.92 billion from $7.88 billion, in line with analyst estimates. Revenue from the information technology division slid 10 percent to $2.53 billion, hurt by delays in contracts for a division that makes communications products for the military and government. Profit in that division shrank by nearly a quarter.
General Dynamics said it’s likely such delays will continue in the second half of the year, and cut its forecast range for the year’s profit by 10 cents to $7 to $7.10 per share. Analysts expect $7.16 per share.
The company’s revenue from sales of combat systems rose just 1 percent to $2.15 billion, as the government cut back on defense spending.
The aerospace division’s revenue rose 16 percent to $1.59 billion, while marine systems revenue grew 5 percent to $1.65 billion.