FALLS CHURCH, Va. (AP) — Shares of General Dynamics fell more than 3 percent in midday trading Wednesday after the aerospace and defense company reported a huge fourth-quarter loss due to charges related to slowing defense spending.
The charges "reflect the fact that some of our markets are contracting as government budgets shrink at home and abroad," Chairman and CEO Phebe Novakovic said in a statement. "They also suggest opportunities for improvement in some areas of our performance, which we are addressing."
The Falls Church, Va., company said it lost $2.13 billion, or $6.07 per share during the October-December quarter, compared with net income of $603 million, or $1.68 per share, a year earlier.
Revenue fell almost 12 percent to $8.08 billion from $9.15 billion.
Excluding the charges, the company earned $491 million, or $1.39 per share. That fell far short of Wall Street expectations. Analysts polled by FactSet expected earnings of $1.90 per share, on average, on revenue of $8.8 billion.
General Dynamics Corp. shares fell $2.19, or 3.1 percent, to $68.52 in midday trading. They are trading in the middle of their 52-week range of $61.09 to $74.54.
The charges were a necessary step given the recent arrival of a new CEO at the company, Sterne Agee analysts Peter Arment and Josh Sullivan wrote Wednesday in a note to investors. They have rated the stock as "Buy," meaning they expect it to outperform the industry during the next year, and they set an $82 price target for the next 12 months.
The fourth-quarter results "reflect the difficult environment presented by defense budget dynamics partially offset by tremendous opportunity in the Aerospace segment," the analysts wrote. They also wrote that the stock will be under near-term pressure, but there's potential gain once it settles in the mid-$60s, because of a stable backlog of Gulfstream jet orders.