General Dynamics Information Technology, a business unit of General Dynamics (GD), was awarded a follow-on task order to continue providing claims processing support to the Department of Health and Human Services’ Centers for Medicare and Medicaid Services (CMS). The contract has a total potential value of $95 million spread over a period of five years.

Per the contract, General Dynamics will perform computer software services to support the Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) system including maintenance, developmental enhancements and special projects. CMS uses General Dynamics Information Technology’s ViPS Medicare System software to process approximately 240,000 claims it receives daily. 

General Dynamics will continue to meet CMS’ objectives by improving the efficiency and effectiveness of claims processing operations and for timely implementation of statutory and regulatory requirements. The company will issue software releases every quarter in response to CMS mandates.

The company also recently achieved the first Healthcare Application Service Provider hosting environment Common Security Framework (CSF) certification from the Health Information Trust Alliance (HITRUST).

Looking forward, key drivers for General Dynamics include reviving fortunes of the business jet market, its stable business of U.S. military vehicles, its backlog, an ongoing share repurchase program and strong cash flow generation.

However, the potential for large defense program cuts, a slowdown or decline in the overall defense budget, Iraq troop withdrawals, and increasing reliance on less predictable international defense business are likely to pose fundamental headwinds for the stock.

The shares of General Dynamics retain a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.

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.

The major competitors of the company are Lockheed Martin Corporation (LMT), EMBRAER – Empresa Brasileira de Aeronáutica S.A. (ERJ) and Force Protection Inc. (FRPT).

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