GD Wins Cybersecurity Contract

Zacks

A General Dynamics (GD) unit, General Dynamics Information Technology, has clinched a deal with the Department of Homeland Security (“DHS”) and other federal agencies to provide cybersecurity services.

The company numbers among the 17 companies that have been considered for the Continuous Diagnostics and Mitigation (“CDM”) program potentially worth $6 billion. Other awardees include International Business Machines Corp. (IBM), Lockheed Martin Corp. (LMT) and Northrop Grumman Corp. (NOC) among others.

Per the five-year contract, General Dynamics will provide DHS, federal, state, local and tribal governments with continuous monitoring tools and services, which are essential to strengthen the security of government networks.

The CDM program – also referred to as Continuous Monitoring as a Service (“CMaaS”) – aims to offer proficient information technology tools and services to combat cyber threats in the civilian “.gov” networks and many other network endpoints like mobile devices. General Dynamics will evaluate and fight cyber risks and also support the launch of DHS' CDM program.

General Dynamics engages in mission-critical information systems and technologies; land and expeditionary combat vehicles, armaments and munitions; shipbuilding and marine systems; and business aviation.

General Dynamics’ revenue exposure is spread over a broad portfolio of products and services that keep the overall growth momentum intact. With back-to-back Department of Defense (DoD) contracts, though small in size, the company seems to be well positioned to generate a steady revenue stream. Recently, General Dynamics won a contract worth $56 million from the U.S. military to provide support services for Iraqi M1A1 Abrams tanks. Per this modification contract, General Dynamics will continue providing logistics and base lifecycle support services to Iraqi M1A1 Abrams tanks.

Again, in August, the defense major received a $562.2 million contract from the DoD to supply Ground Mobility Vehicles 1.1 (GMV 1.1), a modified Humvee.

The company registered a positive earnings surprise of 11.73% in the second quarter. The positive results and consistent contract wins have driven the Zacks Consensus Estimate for 2013 2.9% higher in the last 60 days to $6.96 per share, reflecting year-over-year growth of 7.3%.

However, our apprehensions regarding defense budget cuts still remain, which can weigh on future operating results. General Dynamics currently retains a Zacks Rank #3 (Hold).

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