McAleese & Associates: General Dynamics Projects 2019 CapEx to Rise to $1.2B Driven by Submarine Programs

Jim McAleese

A new report by consulting firm McAleese & Associates says General Dynamics (NYSE: GD) posted $36.2B in full-year 2018 sales, up 17 percent from the previous year.

Jim McAleese, founder and principal at McAleese & Associates and a 2019 Wash100 winner, wrote in the report that the increase was primarily driven by $3.7B in new sales associated with the company’s acquisition of CSRA in April.

The Falls Church, Va.-based aerospace and defense contractor expects its 2019 capital expenditure to increase to $1.2B, or approximately 3 percent of 2019 sales, primarily targeted at General Dynamics Electric Boat’s development work on Columbia-class and Virginia-class submarines.

Phebe Novakovic

“We continue to invest in each of our yards, with particular emphasis at Electric Boat, to prepare for increased production associated with the Block V of the Virginia-submarine program and the new Columbia ballistic-missile submarine…Block V is a significant upgrade in size…requiring additional manufacturing capacity,” General Dynamics CEO Phebe Novakovic said during the company’s earnings call on Jan. 30.

“[W]e have also increased our internal training program, as well as our public/private partnership with Connecticut and Rhode Island, to meet our need for skilled trade,” added Novakovic, a 2019 Wash100 recipient.

General Dynamics’ marine systems sector saw its 2018 revenue rise 6 percent to $8.5B and recorded an 11 percent increase in operating profit and a 9 percent jump in operating margin.

“For 2019, we again expect the marine segment to command a larger share of our capital budget, as we work toward satisfying the nation’s need for its critical naval systems…We are poised to support our Navy customer, as they increase the size of the fleet,” Novakovic said.

The report noted that the company’s mission systems sector saw its revenue grow 6 percent to $4.7B, while the information technology business reported $8.3B in 2018 sales, up 88 percent from the 2017 figure.

According to the firm’s financial results, the combat systems segment’s 2018 revenue rose 5 percent to $6.2B attributed to a $335M prototype development contract under the U.S. Army’s Mobile Protected Firepower program as well as awards related to additional Stryker double-V-hull vehicles and M1A2 Abrams tank upgrades.

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