General Dynamics

(GD) - Get Report

beat Wall Street's earnings expectations Wednesday on stronger sales across all of its units.

The company, which designs defense systems for the U.S. government, reported earnings of 98 cents a share, up 24% from 79 cents in the fourth quarter of 1998. The numbers sailed past consensus expectations from

First Call/Thomson Financial

of 95 cents.

Shares of the stock were little changed, down a mere 5/8, or 1%, to 46 7/16. (Shares closed down 1/8, or 0.27%, at 46 15/16.)

Net income for the period was $198 million, compared with $160 million in the year-earlier quarter.

Revenues for the Falls Church, Va.-based company rose 23% to $2.7 billion for the quarter over $2.2 billion the quarter a year ago. General Dynamics gets around 80% of its revenues from U.S. government contracts.

Sales in the information and technology group surged 127% on a fourth-quarter comparison primarily from three third-quarter acquisitions. "This group is well positioned to take advantage of the considerable growth in its market," said Nicholas Chabraja, chairman and chief executive officer of General Dynamics.

The marine systems division, which makes the nuclear-powered attack submarine Seawolf, lagged the others in the fourth quarter, reporting sales 8% lower than the quarter in 1998.

The aerospace division,

Gulfstream

, involved in the manufacturing of business jets, increased revenues by 18%. Chabraja said stronger productivity and shorter manufacturing cycles boosted sales and improved earnings for Gulfstream. Going forward, he said, demand for jets Gulfstream IV-SP and Gulfstream V continues to be strong.

"Gulfstream is doing well but probably peaking. Sustaining this level of orders is just not likely. They sold about 60 jets this year, but we think that could deteriorate to half that by 2003," said Paul Nisbet, an analyst at

JSA Research

.

Sales and earnings for the combat division grew 12% and 7% respectively for the fourth quarter. The combat division designs M1Abrams tanks, and an assortment of armored combat vehicles and guns for the U.S. government and allies.

Chabraja will look for sales abroad to lead 2000. "We have received a $200 million contract from Egypt for co-production of the first 100 new M1A1 tanks in a program that is expected to grow by an additional 100 vehicles."

Nisbet attributed part of the division's strength to a lack of competition. "They're the only tank re-manufacturing operation taking old versions of M1 tanks and bringing them up to the latest standards."

Chabraja signaled that 2000 would be another year of growth through acquisitions, saying, "Our performance continues to give us strong cash flows and ample financial capacity to pursue consolidation opportunities."

Nisbet said elections will play a big role in the immediate future of General Dynamics.

"The amount of money spent on missiles went from $15 billion to $5 billion over the past 15 years," said Nisbet. "Spending really decelerated over the past eight years. It's not only the White House but the

Congress

as well. If they're both Republican, there will be an 8%-10% growth over the ensuing years. If Democrats get in we'll see more of the same," said Nisbet, who rates the stock a hold. His firm has done no underwriting for General Dynamics.

There has been a recent spike in defense spending, said Nisbet. "It diffuses the issue of defense. We could see a continuation of increased spending if a Republican gets in office."