GD Wins Army Upgrade Contract

Zacks

General Dynamics Corp.’s (GD) business arm, General Dynamics Land Systems, clinched a $118 million contract from the U.S. Army TACOM Life Cycle Management Command to replace the 66 flat-bottom Stryker infantry combat vehicles with the double-V hull (:DVH) design.

The DVH design ensures greater longevity of the combat vehicles in critical missions. It also comes with a more rugged suspension system that enhances vehicle mobility. The first batch of Strykers fitted with DVH came into use in 2011. This shields land forces from the impact of roadside mines and improvised explosive devices.

The delivery of the revamped combat vehicles will commence in Jul 2014 running through Feb 2015. The final leg of the assembly task will take place at the Anniston Army Depot in Alabama. Between Jul 2010 and 2013, two units of DVH Stryker vehicles were produced.

The DVH exchange program is a standing example of the Army-Industry partnership and their optimal utilization of limited fiscal resources in the face of budget austerity to create mutually beneficial solutions.

Earlier, in 2012, General Dynamics teamed up with the Army and launched a DVH pilot project to prove that the components of the flat-bottom vehicles can be upgraded to suit the double-V hull structure. The reusing and modernizing of older parts will be far more economical than manufacturing a new DVH vehicle.

In Apr 2013, the pilot program ended with the timely delivery of 52 Stryker vehicles under the budget. General Dynamics’ collaboration with the Army for advancement in technological innovation is key to unlocking favorable future growth prospects.

The company has been focusing on diversifying its capabilities as is evident from the sizeable technology-based contract wins. General Dynamics in a $6 billion contract was called upon by the Department of Homeland Security (“DHS”) and other federal agencies to provide cyber security support under DHS’ Continuous Diagnostics and Mitigation (“CDM”) program.

Year to date, General Dynamics has been mostly successful in securing low-priced modification contracts. We expect the trend to continue in the latter part of the year owing to the sequestration effect. However, the company caught a few notable contracts like the $212 million deal for the construction and integration of Peripheral Vertical Launching System for the U.S. Navy’s Zumwalt-class destroyers.

General Dynamics presently carries a Zacks Rank #3 (Hold). Other better-placed operators include Zacks Ranked #2 (Buy) Northrop Grumman Corp. (NOC), Lockheed Martin Corp.  (LMT) and B/E Aerospace Inc. (BEAV).

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