, completing its strongest quarter of the year in terms of new orders, expects sales to grow further in the fourth quarter and is increasing its delivery estimates for 2012 slightly to as many as 124 aircraft.
Gulfstream continues to shine in the(GD) portfolio, leading the Aerospace group to a 30% increase in third-quarter revenues and a 20.3% increase in operating earnings. The GD Aerospace group includes both Gulfstream and Jet Aviation.
These returns – which come as Gulfstream’s large-cabin deliveries increased by 45% in the third quarter – buffered lower returns of GD’s Combat Systems and Information Systems and Technology units.
Gulfstream delivered 28 of its large-cabin aircraft in the third quarter and 78 through the first three quarters. This compares with 20 in third quarter 2011 and 60 in the first nine months of that year.
As a result, third-quarter revenues for the Aerospace group were up $424 million to $1.8 billion and earnings climbed $44 million to $261 million. For the year, revenues are up 22% to $5 billion and earnings increased 20.3% to $789 million.
While Gulfstream continues to work through its G650 backlog, which began delivery nearly a year ago but received full certification in early September, overall backlog has begun to come down. The Aerospace group’s funded backlog by the end of the third quarter stood at $15.827 billion, compared with $16.05 billion at the end of the second quarter and $18.306 billion at the end of third quarter 2011.
While large-cabin deliveries remain strong, Gulfstream’s mid-cabin line continues to stumble as the company transitions to its new G280 super mid-sized aircraft. Gulfstream, which obtained full certification for the G280 two months ago, had no mid-cabin aircraft deliveries in the third quarter and just 10 so far this year. This compares with five in the third quarter of 2011 and 16 for the first three quarters of that year.
But GD Chairman Jay Johnson predicts that, with the certification of the G280, the company will deliver 15-20 of its mid-cabin aircraft in 2012. That will combine with the 24 G650s and 80 G450 and G550 aircraft on schedule for delivery this year.
“We remain encouraged by Gulfstream’s sizeable large-cabin backlog and healthy order pipeline,” Johnson says, noting G650 backlog remains at five years, and G450/550 backlog extends 18 months.
Since the time-until-delivery for new G650 orders stretches out so far, Gulfstream is not anticipating order intake for that aircraft to match deliveries right now, Johnson says. But, he adds that Gulfstream is still taking orders for the aircraft.
Overall, the company had the strongest order intake of the year in the third quarter. “Several multi-aircraft orders from North American customers, which we had originally expected in the second quarter, materialized in the third quarter,” he says. North American customers overall accounted for nearly 60% of the new orders, marking a “resurgence” for the market while international markets were potentially softening.
While a little softer, Johnson says Gulfstream has a number of potential orders in the pipeline. “We continue to believe that we will realize several multi-aircraft international orders in next month, although their exact timing … is difficult to predict,” he says.
Despite the stronger orders, Johnson says, “Relative to other periods, however, the order cycle remains somewhat protracted, with a number of factors causing deal closure time to increase.” He cites global economic concerns, particularly in Europe and Asia, along with political uncertainty in the U.S. and abroad for slowing potential deals.
While Gulfstream had a strong quarter, Jet Aviation continued to have its struggles. But this time it was in the services arena, rather than the completions business, that has plagued Jet Aviation over the past couple of years.
Profitability was modestly down at Jet Aviation, Johnson notes, “as the business works aggressively to confront overhead absorption issues exacerbated by the European debt crisis, which is impacting aircraft utilization and service work across the continent.”
Jet Aviation is seeing mixed demand with some pockets of strength, but continued weak demand in Europe, he says. “The leadership team at Jet is working aggressively to address this dynamic situation by optimization our repair services footprint ... with particular focus on right-sizing facilities located in slower markets and investing in our facilities and customer outreach in growth markets,” Johnson says.