General Dynamics Wins Defense Deal

Zacks

Aerospace and defense operator General Dynamics Corp. (GD) received a $562.2 million contract from the U.S. Department of Defense (DoD) to supply Ground Mobility Vehicles 1.1 (GMV 1.1), a modified Humvee. This contract is a part of 17 contracts worth above $1.4 billion awarded by the DoD on Aug 22.

Ground Mobility Vehicles 1.1 will feature a heavier suspension, more powerful engine, more rugged tires, improved ground clearance, and an open bed that is used by the U.S. Special Forces.

These vehicles will be used by defense personnel for support operations such as direct action, special reconnaissance, unconventional warfare, counter-terrorism, security force assistance and counterinsurgency (FNJND) missions. The U.S. defense forces often have to operate in difficult terrain and extremely hostile conditions to counter terrorism and neutralize high value targets. The vehicle will provide a tactical advantage to defense personnel in combat.

General Dynamics' Ordnance and Tactical Systems division will be looking after the delivery of the vehicles. These vehicles will be highly mobile and could be transported by a Chinook helicopter. The production contract is expected to run for seven years and conclude in Sep 2020, ensuring a steady flow of revenue.

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 30 days to $6.96 per share, reflecting  year-over-year growth of 7.3%.

General Dynamics currently retains a Zacks Rank #2 (Buy). The long-term earnings growth of the company is 5.57% on the back of sales growth of 1.31%.

Some of its main competitors, Lockheed Martin Corp. (LMT), Northrop Grumman Corp. (NOC) and The Boeing Company (BA) also carry a Zacks Rank #2.
 

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