Reuters: Hot Stocks: UPDATE 2-Charge, gov't spending cuts hammer Gen Dynamics results

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UPDATE 2-Charge, gov't spending cuts hammer Gen Dynamics results Jan 23rd 2013, 16:22 Wed Jan 23, 2013 11:22am EST * Non-cash charge of $2 billion in IT business * Adjusted EPS for Q4 was $1.39, down from $1.68 year-earlier * Shares down nearly 5 pct in early trading By Andrea Shalal-Esa WASHINGTON, Jan 23 (Reuters) - Weapons and aircraft maker General Dynamics Corp reported a loss from continuing operations and lower-than-expected revenue in the fourth quarter of 2012, as declining demand and shrinking government orders hammered the company's results. Its shares recovered a bit after falling nearly 5 percent in early trading on Wednesday. The company, which builds warships, ground combat vehicles and business jets, reported a quarterly loss from continuing operations of $2.1 billion, or $6.07 per share. The company said the loss was mainly due to a $2 billion noncash charge in its information systems business, reflecting lower U.S. defense spending. It posted a profit of $603 million in the year-earlier period. On an adjusted basis, earnings per share dropped to $1.39, down from $1.68 in the year-earlier period. General Dynamics also took $867 million in other charges, including $301 million in its aerospace and information systems businesses, in the quarter, the company said. Revenue declined nearly 12 percent in the quarter, dropping to $8.08 billion from $9.15 billion, and missing analysts' forecasts of $8.8 billion. Three of the company's four divisions reported lower revenue in the fourth quarter, and the aerospace division saw a sales increase of only a 0.2 percent. For full-year 2012, the company reported a net loss from continuing operations of $332 million, a huge swing from a profit of $2.55 billion a year earlier. That resulted in a net loss per share of 94 cents, down from a net profit per share of $6.94 in 2011. Adjusted for the charge, full-year earnings were $2.3 billion, or $6.48 per share, the company said. Chief Executive Phebe Novakovic, who took over on Jan. 1, said the fourth-quarter charges and the full-year loss reflected contracting markets and a decline in government spending in the United States and overseas. The results also pointed to the need for improvement in some areas, and she said said the company would continue to manage its business aggressively. "The first quarter in charge for new CEO Phoebe Novakovic has included some anticipated clearing of the decks, though the scale of the write downs are pretty eye watering," analyst Rob Stallard with RBC Capital Markets wrote in an analyst note. General Dynamics had overpaid for some acquisitions, and the company's short-cycle and vehicle businesses were declining faster than expected, he said. But the company's Gulfstream business jet business was still in good shape and its shipbuilding business looked stable, which meant investors could use the drop in share prices to buy shares, he said. "Re-basing expectations is no bad thing, and if this is accompanied by a more sensible cash deployment strategy, this sell off today could present an attractive entry point," Stallard said. The company, based in Falls Church, Virginia, said its backlog at the end of the quarter was $51.3 billion, down from $57.4 billion at the end of 2011. Shares of General Dynamics were down as much as 4.9 percent on the New York Stock Exchange after the results, but showed some recovery by late Wednesday morning when they were trading $3.23 lower at $67.47. Link this Share this Digg this Email Reprints

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