General Dynamics Shares Gain as Production of G650 Jet Rises

General Dynamics Corp. rose for a fourth day in five after the maker of Gulfstream jets said it will increase production for its most profitable model, the G650.

Gulfstream order activity is “quite good,” Chief Executive Officer Phebe Novakovic said on a conference call Wednesday.  She said there were more orders last year than in 2014 for in-production aircraft, which excludes models under development, underscoring demand.

General Dynamic rose 1.3 percent to $129 at the close in New York. 

The company’s shares have underperformed their peers in the last year amid investor concerns over industrywide weakening demand for large-cabin private jets because of the sharp downturn in emerging market economies. Gulfstream is transitioning to newer models that will enter service in 2018 and 2019, and that could potentially dampen sales as potential buyers wait for the updated aircraft.

In the past 12 months, General Dynamics fell 6 percent while Raytheon Co. gained 13 percent, Lockheed Martin Corp. increased 9.1 percent and Northrop Grumman Corp. rose 17 percent. General Dynamics had led its peers in 2014 on the back of strong Gulfstream sales.

The company reduced production of the G550 and will cut output of the smaller G450 in the first quarter as it works on introducing two new aircraft models. Revenue for the aerospace unit will rise modestly in 2016 to $8.9 billion, Novakovic said.

Gulfstream is forecast to deliver 104 large-cabin aircraft and 34 mid-size planes this year, she said. That compares with 112 large jets and 35 mid-size this year. The lower number will be offset by more deliveries of G650s versus the smaller G550s and G450s, Novakovic said.

Fourth-quarter sales sales 6.6 percent to $7.81 billion, the company said. Analysts had anticipated $8.23 billion. Earnings from continuing operations were $2.40 a share, topping analysts’ average estimate of $2.38. Information Systems and Technology, which provides communications equipment and services to the military, was the only unit to post a gain in operating earnings. 

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