General Dynamics expects combat vehicle 'inflection point' in 2024

By Ethan Sterenfeld / July 27, 2022 at 4:20 PM

The U.S. Army's multibillion-dollar light tank program and expected growth in European defense spending should begin to lift revenues in General Dynamics' combat vehicle segment around 2024, according to a company executive.

“By 2024 and beyond, we ought to see a nice uptick trajectory in combat systems,” Jason Aiken, the company’s chief financial officer, said today on a quarterly earnings call. “We’re still talking low- to mid-single-digit growth, but we ought to see an inflection point.”

Until then, the combat vehicles division will focus on improving margins, he said.

General Dynamics won the competition last month to produce the Mobile Protected Firepower, the Army’s first light tank in decades. That program is expected to be worth up to $6 billion. Initial deliveries and testing are scheduled for 2024, after which production volumes could increase.

European opportunities extend beyond the sale of 250 Abrams tanks to Poland that was approved in February, Aiken said. Combat vehicle spending must make its way through governments, and that can happen slowly.

“It just takes time for interest to turn into budgets, to turn into appropriations, to turn into contracts, to turn into revenue,” he said. “The demand signals are there. We are having regular dialogue and ongoing conversation with those customers about that interest.”

General Dynamics reported $9.2 billion in revenue for the quarter that ended July 3, a decline of 0.3% from the same period a year earlier. Net earnings were $766 million, up 3.9%.

The combat systems segment, which builds combat vehicles, had $1.7 billion in revenue, down 12.3% from last year. Segment operating earnings fell 7.9%, to $245 million.

The marine systems segment, which builds Navy submarines and destroyers, made $2.7 billion in revenue, up 4.5% from a year earlier. Operating earnings for the segment were $211 million, up 0.5%.