General Dynamics C4 Systems Inc., a business unit of General Dynamics Corporation (GD) won the Command Hardware Systems-4 contract. The fixed-price U.S. Army contract is worth $3.7 billion spread over a period of five years. Per the contract, General Dynamics would provide technology services, system integration, product-testing services, end user support and program management.
This also includes managing rugged local area networks, server platforms, communication gateways, routers, laptops, faxes and various ancillary equipment including vehicle mounts, cables, and operational transit cases.
Work on the contract would be done in Taunton, Massachusetts and is expected to be completed by August 26, 2016. The multi-billion dollar contract was easy meat for the defense prime as it was the sole bidder for the contract.
The contracting unit, General Dynamics C4 Systems, focuses on the development, design, manufacturing and integration of secure communication, information and technology solutions. C4 Systems is a part of General Dynamics’ Information Systems and Technology segment.
General Dynamics was the fourth largest U.S. defense contractor in terms of revenue in fiscal 2010, following sector leaders like The Boeing Company (BA), Lockheed Martin Corp. (LMT) and Northrop Grumman Corp. (NOC).
General Dynamics’ revenue exposure is spread over a broad portfolio of products and services in business aviation; combat vehicles, weapons systems and munitions; shipbuilding design, repair and construction; and information systems, technologies and services. Diversification of revenue through exposure to a number of uncorrelated markets will keep the overall growth momentum steady.
Looking forward, key drivers of growth for the company include a diversified revenue exposure, its stable business of U.S. military vehicles, 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 large. Also, we have become slightly cautious about the company’s recent G650 crash and 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.
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.
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