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GD Gets $55M DoD Contracts

Zacks Equity Research

General Dynamics Corp. (GD) has received two contracts from the Department of Defense (DoD). The total contract value comes to $54.7 million.

As part of the award win, General Dynamics unit − General Dynamics Advanced Information Systems Inc. − received a sizeable $29.7 million  contract for engineering and technical services in support of the AN/BYG-1 tactical control system for U.S. Navy submarines.

This is a cost-plus-incentive-fee modification contract under which the company will continue to transfer the AN/BYG-1 Tactical Control System from a Technology Insertion (TI-10) baseline to a TI-12, incorporate Advanced Processing Build (APB-13) and instigate development of the TI-14 baseline. General Dynamics will deliver multiple variants of the system aboard multiple submarine platforms. The work is due for completion by July next year.

Under the second contract, General Dynamics Information Technology, a general Dynamics business wing, won a $25 million modification contract for about 300,000 hours of integrated logistics services for technical analysis and investigations of Foreign Military Sales (FMS) programs. FMS mainly refers to the programs under which the U.S. government operates as an intermediary between the U.S. defense contractors and foreign governments willing to procure their weapons systems. General Dynamics expects to wrap up the work on this second contract by September next year.

General Dynamics has a long-standing business association with the U.S. defense establishments and tries to meet its commitments in terms of maintaining products and services standard along with delivery timing.

The performance of defense operators primarily depends on the orders coming from the national and international defense establishments. U.S. defense budget cuts due to the ongoing sequester could impact the performance of the defense operators. We believe these small-ticket domestic as well as overseas orders will enable the defense pros to retain a regular revenue inflow.

General Dynamics currently has a Zacks Rank #3 (Hold). Other stocks from the sector that are presently performing well include Erickson Air-Crane Inc. (EAC), The Boeing Company (BA) and Northrop Grumman Corporation (NOC). While Erickson carries a Zacks Rank #1 (Strong Buy), Boeing and Northrop Grumman retain a Zacks Rank #2 (Buy).

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