UPDATE 3-General Dynamics beats profit estimates on higher Gulfstream deliveries

(Adds CEO comment from conference call)

April 24 (Reuters) - Higher deliveries of Gulfstream jets helped General Dynamics Corp beat analysts’ first-quarter profit estimates on Wednesday, sending shares of the U.S. aerospace and defense company surging nearly 6 percent before those gains were erased in late morning trading.

Revenue from its aerospace unit jumped 23 percent to $2.24 billion in the first quarter ended March 31, as Gulfstream deliveries, an important metric for investors, increased to 34, from 26 a year earlier.

“We’re in a period of solid, but not overheated demand” for business jets, General Dynamics Chief Executive Phebe Novakovic said on a conference call to discuss the results.

Revenue at the company’s IT unit, which serves the Department of Defense, surged 91 percent to $2.17 billion.

Shares of the Falls Church, Virginia-based company were down 0.7% at $181.03 in late morning trading, erasing gains after earlier surging as much as 5.9% following the results.

Defense contractors like General Dynamics, Lockheed Martin and Northrop Grumman Corp are expected to benefit from higher defense spending as U.S. President Donald Trump’s looser policies on foreign arms sales have boosted demand for ships and jets.

Forecasters and corporate planemakers expect higher business jet deliveries this year, fueled by the recent entry into service of new aircraft such as Bombardier’s Global 7500 and U.S. rival Gulfstream’s G500.

Novakovic said General Dynamics expected U.S. Federal Aviation Administration certification of the G600 business jet in June. In February, Reuters reported that General Dynamics would see its first G600 delivery by the end of June.

Net earnings fell to $745 million, or $2.56 per share, in the quarter, from $799 million, or $2.65 per share, a year earlier. Profit was higher than analysts’ average expectation of $2.42, according to Refinitiv data.

Total revenue grew 23 percent to $9.26 billion, beating analysts’ average estimate of $8.84 billion.

Profit margins fell across all business units compared with the same period last year as cash on hand decreased to help the company ramp up production of next-generation business jets and submarines.

During the quarter, General Dynamics was awarded a $2 billion contract for materials to build Virginia-class fast attack submarines for the U.S. Navy. (Reporting by Mike Stone in Washington D.C. and Sanjana Shivdas in Bengaluru; Editing by Bernadette Baum)