Gulfstream Aerospace deliveries dropped by eight units year-over-year in the third quarter to 27 aircraft as the company continued to grapple with supply chain challenges, parent company General Dynamics (GD) reported on Wednesday. Third-quarter deliveries included 22 large-cabin and five midsize-cabin models, down from 28 large cabins and seven midsize from the same period a year ago.
As a result, revenues at GD's aerospace group—which includes both Gulfstream and Jet Aviation—slid in the third quarter by $315 million to $2.03 billion. While it works through the ongoing supply chain issues that have plagued the Savannah, Georgia manufacturer (along with the industry in general) this year, the company anticipates more than 60 aircraft deliveries in the fourth quarter. However, Gulfstream will likely not reach its 2023 delivery forecast of 145 units.
Despite the decline in deliveries, GD officials were upbeat about the order intake and the strengthening results during the year. “We enjoyed a strong quarter, particularly so in light of the supply chain and program mix headwinds that time will cure,” remarked GD CFO Jason Aiken during the third-quarter earnings call with analysts.
"We're on track to deliver between 40 and 45 currently in-service aircraft in the fourth quarter," he shared.
The aerospace segment secured $2.9 billion in new orders this quarter with a book-to-bill of 1.44:1, pushing its backlog to $20.1 billion. The quarter's operating earnings were $268 million, translating to a 13.2 percent operating margin. In a sequential comparison with the second quarter, the aerospace division witnessed an increase in both revenue (by $79 million or 4 percent) and operating earnings (by $32 million or 13.6 percent).
The 27 aircraft delivered in the third quarter also represented an increase of three from the preceding quarter. “We anticipate in excess of 60 deliveries in the [fourth] quarter, assuming we're granted FAA certification [for the G700] before the end of the year,” noted Aiken. “That said, as you can tell, there's a considerable amount of uncertainty as we get closer to certification.”
The G700 flight test and certification program is approaching its final stages. “We continue to plan for certification in the fourth quarter of this year, largely dependent upon the availability of FAA resources and the credit the FAA may allow for company flying,” he added. “We currently are spending most of our engineering time on final reports and data submission.”
"What we can't do yet is declare victory on the supply chain issues and say that by early next year, they're going to be completely solved," Aiken said. "A little bit more time is needed to see what the net impact is to that 2024 outlook. I think we'll have a better sense of that in January."
Corporation-wide in the third quarter, GD reported net earnings of $836 million from revenues of $10.6 billion, equating to a diluted earnings per share (EPS) of $3.04. The company’s net cash from operating activities was $1.3 billion, or 158 percent of the net earnings.
When compared with the third quarter of the previous year, revenues increased by $596 million, or 6 percent. Operating earnings and net earnings decreased by $41 million (3.7 percent) and $66 million, respectively, leading to a 6.7 percent drop in EPS.
Robust demand has led to substantial growth in the company's backlog. General Dynamics said there was a company-wide backlog of $95.6 billion, the largest in its history. The total estimated contract value, which combines backlog with estimated potential contract values from IDIQ contracts and unexercised options, stood at $132.9 billion by the quarter’s end.
During the earnings call, Bill Moss, vice president and controller at GD, said, “Marine systems and aerospace led the way with book-to-bill ratios of 2.3 and 1.4, respectively. For the second quarter in a row, this led to a record-level backlog: $95.6 billion at the end of the quarter, up 4.6 percent from last quarter and up 7.6 percent from a year ago.”