(GD) General Dynamics Wins Task Order

General Dynamics Information Technology, a business unit of General Dynamics Corporation (GD), received a task order to provide enterprise communication services under the Defense Intelligence Agency’s (‘DIA’) Solutions for the Information Technology Enterprise contract. If all options are exercised, the task order is worth $178 million for five years.

Under the contract, General Dynamics will support enterprise data, voice and video communications services across the information technology life-cycle that includes strategy, design, transition, operations and maintenance. Additionally, the company will be responsible to provide terrestrial, wireless and satellite communications support on the joint worldwide intelligence communications system, secret Internet protocol router network, non-classified Internet protocol router network and other coalition networks.

The work will be performed in the Washington, D.C. area; Colorado Springs, Colorado; Tampa and Miami, Florida; Honolulu, Hawaii; Stuttgart, Germany; Molesworth, United Kingdom; South Korea and other locations globally.

General Dynamics has been supporting the DIA for more than 40 years. This contract enables the company to continue to provide exceptional service to the DIA’s Directorate for Information Management’s critical enterprise communications architecture.

The DIA is a Department of Defense combat support agency and is also an important member of the United States Intelligence Community. It is a major producer and manager of foreign military intelligence. It provides military intelligence to warfighters, defense policymakers and force planners in support of U.S. military planning and operations and weapon systems acquisition.

Coming back to the company, General Dynamics’ diversification of revenue through exposure to a number of uncorrelated markets is expected keep the overall growth momentum steady. Looking forward, key drivers include 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 mainly tied to the U.S. defense budget, where the threat of budget cuts is looming high. Also, we have turned slightly cautious about the company’s steadily-dropping order backlog, the recent G650 crash and risks related to the execution of key projects. The company presently retains a short-term Zacks #2 Rank (Buy). We have a 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. Some of its main competitors include The Boeing Company (BA) and Textron Inc. (TXT).

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