General Dynamics cuts 2020 profit forecast as pandemic weighs on IT, aerospace

(Reuters) - General Dynamics Corp GD.N cut its full-year profit outlook on Wednesday as its information technology and aerospace units grappled with coronavirus-led disruptions, although it signaled a gradual pick-up in demand for its Gulfstream jets.

FILE PHOTO: A General Dynamics NASSCO ship yard entrance is shown in San Diego, California, U.S., June 17, 2019. REUTERS/Mike Blake

The company said some high-margin programs at its IT business had come to a “hard stop” because of the pandemic, leading to a 12.7% drop in sales at the unit in the second quarter.

The business accounted for about 21% of its 2019 revenue, while adding 13.5% to its operating earnings.

Earnings per share for the year are now expected to be between $11 and $11.10, down from a previous forecast of between $11.30 and $11.40.

The defense contractor, however, topped Wall Street estimates for quarterly profit as it delivered 32 jets, up from 23 in the preceding quarter, despite challenges in making deliveries due to COVID-related travel restrictions.

“When we look at where we are right now at Gulfstream, we’ve seen the beginning of what would appear to be an increase in demand,” Chief Executive Officer Phebe Novakovic said on a post earnings call.

Novakovic, however, cautioned that it was still too early to tell the slope of recovery.

Executives and forecasters are seeing a rise in demand for business jet flights this summer due to a pick-up in leisure trips and easing European travel restrictions.

That, in turn, has led to expectations of new orders at business jet makers.

Sales at the aerospace unit fell 7.6% to $1.97 billion.

Its marine systems unit, which makes ships and submarines for the U.S. Navy, was a bright spot, with sales rising 6.3% to $2.47 billion. Total revenue fell 3% to $9.26 billion.

Net earnings plunged 22.5% to $625 million, or $2.18 per share. Analysts expected earnings of $2.15 per share.

Shares were down 2.2% at $145.20.

Reporting by Sanjana Shivdas in Bengaluru; Editing by Amy Caren Daniel