A General Dynamics Corporation (GD) business wing, General Dynamics Advanced Information Systems, has received a U.S. Navy performance-based logistics (“PBL”) contract for the support of the Advanced Mission Computers (“AMC”) in the Navy's F/A-18 Hornet and AV-8B Harrier aircrafts. The contract is valued at $31.5 million.
This contract calls for General Dynamics to perform repair work of the AMCs for the F/A-18E, F/A-18F and EA-18G aircraft. Additionally, the company will develop the mission computer systems for the AV-8B model.
The AMC − a tough integrated information processing system − is assembled with commercial off-the-shelf products. It is a high-performance, high-reliability mission and display-processing system. It provides situational awareness and combat systems control to the flight crew. Further, these computers are capable of processing high-speed data flows from the latest sensor technologies. The system is used for input/output, video, voice and graphics processing and can perform tasks in extreme environmental conditions.
General Dynamics has been delivering F/A-18 AMCs since 2002. Over the years, the requirements for AMCs have expanded to include equipping the Navy to retrofit operational aircraft to extend the life of the jets. The latest contract will be performed at the General Dynamics facility in Bloomington, Minn.
Based in Falls Church, Va., General Dynamics is one of the leading companies in business aviation, information systems and technologies, shipbuilding and marine systems, and land and amphibious combat systems, as well as armaments and munitions.
General Dynamics Advanced Information Systems, a unit of Information Systems and Technology, provides intelligence, surveillance and reconnaissance solutions across all domains. The segment is progressing well with a number of contracts. Backlog of orders was down in all segments in the first quarter of 2013 except for the Information Systems and Technology Aerospace division.
In April this year, this unit received a contract to produce Type-3 AMC for the F/A-18E/F and E/A-18G Super Hornet aircraft. The contract, awarded by the U.S. Navy, is valued at roughly $17.9 million.
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. However, an uncertain political landscape makes future defense budgets vulnerable to cutbacks. Additionally, the falling overall order backlog is a headwind for the company.
General Dynamics presently retains a Zacks #3 Rank (Hold). Well-placed stocks in the defense industry include Zacks Ranked #1 Erickson Air-Crane Inc. (EAC) and Zacks Ranked #2 (Buy) Northrop Grumman Corporation (NOC) and Wesco Aircraft Holdings, Inc. (WAIR).
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