General Dynamics lifts Q3 EPS 15.7% to $4.49 as revenue climbs 12.9% to $14.57B

Orders ran far ahead of sales, leaving a backlog of $220.3B for Danny Deep to inherit when he succeeds Phebe Novakovic as chief executive.

Third-quarter revenue rose 12.9% to $14.57B, operating earnings rose 14.7% and diluted earnings per share rose 15.7% to $4.49. Net earnings were $1.23B, up 16.1%, and the operating margin widened by 20 basis points to 10.5%.

The order book is the real news. Backlog ended the quarter at $220.3B, with a book-to-bill ratio of 6.8 to 1. That ratio compares new orders with revenue in the period, so at that level the company won 6.8 times as much work as it billed. Total estimated contract value, which also counts options and work not yet funded, stood at $270.7B. Revenue grew in all four segments, with Technologies up 10.8% to $3.68B and Combat Systems up 6.0% to $2.39B.

Cash backed the earnings. Operating cash flow was $1.7B, or 139% of net earnings. The company paid $429M in dividends, spent $481M on capital projects and cut debt by $500M, ending the quarter with $7B of debt and $4.4B of cash.

That sets up the question investors will ask of the next chief executive. Novakovic, who has run the company since 2013, is due to hand over to Deep in 2027. She credited consistent backlog growth and a decade of heavy investment for the company's prospects, which reads as an account of the business she is leaving behind as much as a forecast. Orders of this size make the handover easier, because they give Deep years of visible work. They also set the bar: from here, the test is whether he can turn the backlog into sales at the pace she has.