Zacks_Analysts' Blog : General Dynamics Books Command Deal - Analyst Blog

A business unit of General Dynamics Corporation (GD), General Dynamics Ordnance and Tactical Systems, received an indefinite delivery, indefinite quantity contract worth $198.7 million. It will supply 120mm mortar ammunition to the U.S. Marine Corps Systems Command that will support the Expeditionary Fire Support System (EFSS). Under the contract, the company has already received two delivery orders worth $101.0 million.

The Command's EFSS is a light, mobile and vertically transportable indirect fire support system composed of a pair of Prime Mover vehicles, and a 120mm M327 mortar weapon. It is a combination of spin-stabilized, insensitive munitions comprising four rounds: High Explosive, Smoke, Illumination and Practice. It is designed to be internally transportable in the MV-22B Osprey and the CH-53 helicopter and is used for missions that require tactical versatility, speed and close-in fire support.

General Dynamics’ revenue exposure is spread over a broad portfolio of products and services in business aviation, combat vehicles, shipbuilding design, repair and construction, and information systems. Looking forward, key drivers include reviving fortunes at its business jet market, its stable business in U.S. military vehicles, over $59 billion in backlog, an ongoing share repurchase program and strong cash flow generation. However, the company’s fortunes are largely tied to the U.S.defense budget, where the threat of budget cuts is looming high. Also, we have turned slightly cautious about the company’s steadily falling order backlog along with risks related to the execution of key projects. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.

Defense and aerospace operator General Dynamics announced its fourth-quarter 2010 earnings from continuing operations of $1.91 per share, surpassing the Zacks Consensus Estimate of $1.85. In 2010, earnings from continuing operations came in at $6.82 per share, surpassing the Zacks Consensus Estimate of $6.76. The company generated total revenue of $8.6 billion in the quarter versus the Zacks Consensus Estimate of $8.9 billion. Full year 2010 total revenue was $32.5 billion versus the Zacks Consensus Estimate of $32.8 billion.

Recently, the company increased its quarterly dividend by 12.0% to 47 cents versus its previous dividend of 42 cents. Going forward, the Zacks Consensus Estimates for first quarter 2011 and fiscal year 2011 are currently at 81 cents per share and $3.14 per share, respectively. The company mainly competes with The Boeing Company (BA), Lockheed Martin Corporation (LMT), Textron Inc. (TXT).

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.