GD Bags $30M US Army Contract - Analyst Blog

Virginia-based US defense contractor, General Dynamics Corp. (GD), through its business unit, General Dynamics Armament and Technical Products won a six-year $30 million contract from the U.S. Army. The contract requires General Dynamics to produce and provide field support to Joint Biological Point Detection Systems (JBPDS).

 

As per the terms of the deal, production will take place at General Dynamics Armament and Technical Products' detection production facility in Charlotte , N.C. and will begin in April 2011.

 

The Joint Biological Point Detection System provides biological agent point-detection, identification, and sampling capability for both fixed-site and mobile operations in less than one minute. The system is available in man-portable, shelter-based, ship-based and trailer-mounted variants.

 

General Dynamics is principally engaged in mission-critical information systems and technologies; work related to land and expeditionary combat vehicles, armaments and ammunitions; shipbuilding and marine systems; and aviation business. The company is also the fourth largest U.S. defense contractor in terms of revenue in fiscal 2009.

 

Ending the second fiscal quarter of 2010, the company's total backlog was $62.5 billion, and the estimated potential contract value was an additional $21.7 billion. Cash and cash equivalents were approximately $1.9 billion and cash generation from operating activities in the quarter was $477.0 million.

 

Despite winning new contracts, the future prospects of General Dynamics depend chiefly upon defense spending. Any cut backs in defense spending, therefore, will impact the company's financial prospects substantially. Prime competitors of the company include Boeing Co. (BA), Lockheed Martin Corporation (LMT), and Textron Inc. (TXT).

 

Given General Dynamic's dependence on the U.S defense budget and risks related to the execution of key projects, we maintain a Neutral recommendation on the stock.