(Reuters) - General Dynamics Corp (GD.N), one of the leading U.S. defense contractors, reported higher-than-expected revenue and net income after a strong first quarter for its marine systems division.
Net earnings rose to $717 million, or $2.30 per share, from $716 million, or $2.14 per share, a year earlier.
Analysts polled by Thomson Reuters I/B/E/S had forecast a profit of $2.16 a share.
Revenue fell to $7.72 billion from $7.78 billion but exceeded analysts' estimates of $7.69 billion.
Shares of General Dynamics, whose products include Gulfstream jets, tanks and U.S. Navy ships, were up by about 2.3 percent in morning trading.
The company's slightly lower first-quarter revenue was in part due to a drop in aircraft sales.
The company's aerospace division delivered 27 "outfitted" Gulfstream aircraft, down from 32 a year earlier. An aircraft's outfittings include exterior painting and installation of customer-selected interiors.
The aerospace division had a 5.7 percent decrease in revenue but the marine systems division had a nearly 10 percent increase because of contracts such as $155 million from the U.S. Navy for planning and execution of depot-level maintenance for the USS Essex.
On a call with analysts, Chief Executive Phebe Novakovic said there was interest in the company's combat systems division from international customers, in particular the Middle East.
"So the pipeline looks good internationally and if you look at the (U.S.) Army budget they are beginning to recapitalize," Novakovic said.
The combat system division saw a 6.6 percent decrease in revenue, which Chief Financial Officer Jason Aiken said was largely due to a stronger U.S. dollar.
Jeff Windau, an analyst with Edward Jones, said geopolitical tensions including a resurgent Russia and slowly increasing U.S. defense spending had allowed General Dynamics to have a strong quarter.
"The military business has definitely been a positive for them and if you look at profitability, they did a great job of growing margins," Windau said.
"So overall, just a very solid quarter and also being very opportunistic ... buying back shares which is helping them to grow earnings as well."
The company reported it had repurchased 7.8 million outstanding shared in the first quarter.
Reporting by Idrees Ali; Additional reporting by Sweta Singh and Ankit Ajmera in Bengaluru; Editing by Lisa Von Ahn and Bill Trott