RBC: GD Connecting the dotsWhat happened?
General Dynamics posted Q1 results above expectations, driven by solid defense demand. However, Aerospace revenue was down 0.6% Y/Y, and backlog was stable at $19.3B, down slightly at -0.9% Y/Y. Aerospace book-to-bill was 0.91x for the quarter, down from 1.7x in Q1/2022.
Our take:
We see the read-through for Bombardier as neutral following General Dynamics’ Q1 release this morning. Key is that the Aerospace segment looks to be keeping steady, only showing marginal declines given the banking turmoil and macro uncertainty that played out during the first quarter. GD highlighted strong services sales, with Aerospace revenues only marginally lower (-0.6% Y/Y). However, the company delivered 21 aircraft (17 large-cabin and 4 medium-cabin), down from 25 in Q1/22, pointing to supply chain issues impacting deliveries. The company expects these issues to resolve in the back half of the year, with deliveries picking up then. Given the steps it took to strengthen supplier relationships early in the pandemic, we see BBD as better insulated from supply chain headwinds. Still, we will look for more colour from management on the call tomorrow. Backlog was stable, ending at $19.3B, down ~1% from last quarter. Aerospace book-to-bill was 0.91x for the quarter, down from 1.7x in Q1/2022.