October 26, 2016 / 2:08 PM / 2 years ago

UPDATE 2-General Dynamics sales hit by Gulfstream jet transition

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By Rachit Vats

Oct 26 (Reuters) - General Dynamics Corp’s quarterly revenue missed analysts’ estimates, as its aerospace division delivered fewer Gulfstream business jets ahead of a transition to new models.

The company plans to begin deliveries of the new Gulfstream G500 in 2018 and the G600 in 2019.

“We are transitioning from the G450 to the G500 program, and the G550 to the G600,” a company spokesperson said. “With this, there are production cuts to the 450 and 550.”

General Dynamics said on Wednesday the aerospace unit delivered 27 “outfitted” Gulfstream aircraft in the third quarter ended Oct. 2, down from 43 a year earlier.

The company’s planned launch of the new models comes in the backdrop of weak demand for business jets.

Sales of business jets have slumped as an uncertain global economy forces companies, oil tycoons and billionaires to tighten their purse strings.

Rival Textron Inc said last week it would restructure its aviation business, which makes Cessna aircraft, citing a “stubbornly soft” market for business jets.

“The outlook for GD’s defense business is strong and the valuation is low,” Bernstein analyst Douglas Harned wrote in a client note on Wednesday.

“The lower valuation is due to Gulfstream and concerns over a large cabin business jet market, which we agree is weak,” he said.

General Dynamics’ combat system unit makes the medium-weight Stryker combat vehicle and also supplies weapons systems and munitions.

The company’s marine systems unit builds nuclear-powered submarines, surface combatants and auxiliary and combat-logistics ships for the U.S. Navy.

Sales in the aerospace business declined 13.5 percent in the third quarter ended Oct. 2.

Revenue rose only in the company’s information systems & technology unit, which provides cyber security systems to the U.S. government, while it fell in the other three units.

General Dynamics’ total revenue declined 3.3 percent to $7.73 billion, while analysts on average had expected $7.91 billion, according to Thomson Reuters I/B/E/S.

Net income from continuing operations rose to $767 million, or $2.48 per share, in the third quarter, from $733 million, or $2.28 per share, a year earlier.

The company’s shares reversed course to be up marginally at $152.58 in afternoon trading. They had declined as much as 2.3 percent earlier. (Reporting by Rachit Vats in Bengaluru; Editing by Sriraj Kalluvila)

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