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GD to Support Military Hospitals

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General Dynamics Information Technology, a business unit of General Dynamics Corporation (GD), was awarded three task orders to provide initial outfitting and transition (IO&T) services to the U.S. Army Corps of Engineers, Engineering and Support Center, Huntsville, Alabama.  Under these task orders, General Dynamics will plan, purchase, deliver and install medical and information technology equipment and furniture in support of new military hospitals at Fort Riley, Kansas, and Fort Benning, Georgia. It will also support new clinics at Camp Carroll and Camp Humphreys in South Korea.  The task orders have a combined value of $100 million over 28 months.

Under the first task order, General Dynamics will outfit and help activate the new Irwin Army Community Hospital at Fort Riley.  General Dynamics will relocate and transition a staff of approximately 1,200 to the new hospital, which will serve thousands of Army soldiers and their families.  This new 555,000 square foot hospital will include 44 inpatient beds, 4 operating rooms, a 21-bed emergency room and a traumatic brain injury clinic. The hospital is scheduled to open in May 2014.

Under the second task order, General Dynamics will equip and help launch the new Martin Army Community Hospital at Fort Benning.  This project will encompass 745,000 square feet with 70 inpatient beds. The hospital is scheduled to open in November 2014 with a staff of more than 1,500.

Under the third task order, General Dynamics will supply outfitting and transition services for the new Camp Carroll Health and Dental Clinic and Camp Humphreys Dental Clinic in South Korea.  These projects will include delivery and installation of medical, dental and IT equipment for two large clinics located in Waegwan and Pyeongtaek, South Korea.  Both facilities are expected to open by early 2015.

General Dynamics had previously provided similar healthcare-facility support services to the new Walter Reed National Military Medical Center in Bethesda, Maryland, and the new Fort Belvoir Community Hospital in Fort Belvoir, Virginia.  

We view General Dynamics as a well-run company that is likely to continue delivering on expectations, driven by revenue growth, margin expansion and cash flow generation. Looking forward, key drivers include a reviving business jet market business and a stable business for the U.S. military vehicles.

However, we believe that the fortunes of the company are largely tied to the U.S. defense budget, where the threat of budget cuts is looming. Also, we have turned slightly cautious about the risks related to the execution of key projects.

Like its peers, Northrop Grumman Corporation (NOC) and Lockheed Martin Corporation (LMT), General Dynamics presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.

Based in Falls Church, Virginia, 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. The company operates through four segments: Information Systems & Technology Combat Systems, Marine Systems, and Aerospace.

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