General Dynamics Corporation (GD - Analyst Report) announced second-quarter 2015 earnings from continuing operations of $2.27 per share, comfortably surpassing the Zacks Consensus Estimate of $2.03 by 11.8%. Earnings also increased 20.7% from the prior-year figure of $1.88, backed by improved operating margins.

General Dynamics Corporation - Earnings Surprise | FindTheBest

Total Revenue

In the second quarter, General Dynamics’ total revenues of $7,882 million beat the Zacks Consensus Estimate of $7,699 million by 2.4%. Total revenues were also up 5.5% from $7,474 million in the year-ago quarter.

The year-over-year increase was due to higher contribution from the Aerospace, Information Systems and Technology and Marine Systems segments, partially offset by lower sales from Combat Systems.

Backlog

Total backlog of the company was $70 billion, down 1.5% year over year. However, funded backlog at the end of the quarter grew 9.3% year over year to $55.4 billion.

Segment Performance

Aerospace: The segment reported second-quarter 2015 revenues of $2,258 million, up 13.2% year over year. Operating income of $439 million increased 14.3% from $384 million in the year-ago quarter.

Combat Systems: Segmental revenues decreased 3.9% year over year to $1,408 million. Operating earnings however edged up 2.7% to $226 million in the prior year.
 
Information Systems and Technology: The segment reported revenues of $2,215 million, increasing 2.4% from the year-ago quarter. Operating income surged 26.1% year over year to $237 million.

Marine Systems: The segment’s revenues of $2,001 million were 8.1% higher than $1,851 million a year ago. Operating income rose 7.5% year over year to $187 million.

Operational Highlights

Company-wide operating margins expanded an impressive 100 basis points to 13.7% from 12.7% a year ago.

In the quarter under review, General Dynamics’ operating costs and expenses increased 4.2% year over year to $6,801 million.

Financial Condition

As of Jul 5, 2015, General Dynamics’ cash and cash equivalents were $4,032 million compared with $4,388 million as of Dec 31, 2014.
 
Long-term debt as of Jul 5, 2015, was $3,411 million, almost in line with the 2014-end level.

In the second quarter 2015, the company’s cash flow from operating activities was around $603 million compared with $1,348 million in the year-ago period. Free cash flow from operations in the quarter was $511 million, down from $1,158 million in the prior year.

Guidance

The company lifted its full-year earnings per share outlook from continuing operations from $8.05–$8.10 to $8.70–$8.80.

Other Releases

The Boeing Company (BA - Analyst Report) delivered second-quarter 2015 adjusted earnings of $1.62 per share, missing the Zacks Consensus Estimate of $1.70 by 4.7%. Earnings also decreased 33.1% from $2.42 per share a year ago hurt by a huge charge related to its military KC-46 tanker program.

Pentagon’s prime contractor, Lockheed Martin Corp. (LMT - Analyst Report) posted second-quarter 2015 earnings of $2.94 per share, comfortably surpassing the Zacks Consensus Estimate of $2.67 by 10.1%. Earnings also jumped 6.5% from $2.76 per share a year ago.
 
Northrop Grumman Corp.’s (NOC - Analyst Report) second-quarter 2015 adjusted earnings came in at $2.47 per share, 6% higher than the Zacks Consensus Estimate of $2.33.

Our View

General Dynamics’ revenues are derived from a broad portfolio of products and services that help to keep the overall growth momentum steady. The company is one of the only two contractors in the world equipped to build nuclear-powered submarines.

General Dynamics currently has a Zacks Rank #2 (Buy).