Contract for General Dynamics – Analyst Blog

General Dynamics Information Technology, a business unit of General Dynamics (GD) won a contract worth $409 million. The contract entails General Dynamics to support the U.S. Army Medical Department’s healthcare construction projects, including modernization of current Army medical facilities and a shift to the newly constructed facilities.

 

General Dynamics will facilitate planning, outfitting and transitioning the staff and medical facilities associated with the U.S. Army Medical Department healthcare construction projects. Further, the company will provide interior design development, equipment needs assessments, relocation services, equipment installation and maintenance, and also employee training.

 

General Dynamics reported revenue of $8.104 billion in the second-quarter 2010, a slight increase of $4 million year over year. We expect continued contract wins to help General Dynamics to post solid results going forward.

 

During the second quarter conference call, General Dynamics guided full year 2010 earnings to a range of $6.60 – $6.65 per share.

 

The Zacks Consensus Estimates for fiscal third-quarter 2010 and fourth-quarter 2010 are $1.64 and $1.81 per share, respectively. For fiscal years 2010 and 2011, the Zacks Consensus Estimates are $6.66 and $7.04 per share, respectively.

 

General Dynamics generates a major portion of its revenue from contracts offered by the U.S Army. As a caveat, it may be noted that the defense department is planning to cut down on defense expenses by $100 billion over the next five years. The future prospects of the company will be affected if the budget pruning is carried out.

 

We thus maintain our Neutral recommendation on General Dynamics. The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the shares over the near term.

 

Headquartered in Falls Church, Virginia, General Dynamics Corporation engages in mission-critical information systems and technologies; land and expeditionary combat vehicles, armaments and munitions; shipbuilding and marine systems; and business aviation.