Zacks_Analysts' Blog : GD to Supply Armored Vehicles - Analyst Blog

GeneralDynamics Land Systems-Canada, a business unit of General Dynamics Corporation (GD), received a contract modification worth $126 million from the U.S. Army TACOM Life Cycle Management Command.

Per the contract modification, General Dynamics will provide 73 Light Armored Vehicles (LAVs) for a Foreign Military Sale (FMS).  The contract was signed through the Canadian Commercial Corporation, a Crown Agency of the Canadian Government.

With this contract modification, the original contract, announced on January 4, 2011, is now valued at $264 million for 155 units. 

Vehicles provided under this contract will be the LAV II version, powered by a 300 horsepower engine, with a gross vehicle weight of up to 32,000 lbs (14,500 kg).  The vehicles will be produced in six different variants.

General Dynamics continues to benefit from strong congressional support for its programs in the 2011–12 defense budgets. Looking forward, key drivers include the reviving fortunes for the business jet market, its stable business of U.S. military vehicles, an ongoing share repurchase program and strong cash flow generation.

However, the company is largely tied to the U.S. defense budget, where the threat of budget cuts is looming high. Recently, in October, General Dynamics announced third-quarter 2011 operating earnings of $1.83 per share, which surpassed the Zacks Consensus Estimate of $1.77. The results of the company were 13 cents ahead of the year-ago figure of $1.70 per share.

The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock. Similarly, its peers The Boeing Company (BA) and Textron Inc. (TXT) hold short-term Zacks #3 ranks (Hold).

Headquartered 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.