General Dynamics
(GD) recently said that its unit, General Dynamics Armament and Technical Products, has received a $100 million contract from the US Army TACOM-Rock Island Ill division. The contract for supplying M2 flex machine guns is of indefinite delivery-indefinite quantity (IDIQ) nature and is scheduled to be completed by April 2012.

The M2 flex machine gun is a belt-fed, recoil-operated, air-cooled, right-hand/left-hand feed compatible, crew-served arm and is suited for both offensive and defensive operations. The guns will be manufactured at the company’s Saco, Maine facility and its technology center in Burlington, Vermont will administer program management.

General Dynamics is likely to continue meeting investor expectations backed by strong revenue growth, margin expansion and cash flow generation. The recent acquisitions of Jet Aviation and Axle Tech, increased Navy spending and resumption of the Pander program for the Czech Republic will provide near-term upside potential despite apprehensions about defense spending under the Obama Administration, steady ramp down of BOWMAN program and the bleak Gulfstream scenario.

Shares of General Dynamics closed at $58.73 on Wednesday, trading at 9.2X trailing 12-month EPS. We maintain our Outperform recommendation on the stock.

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