General Dynamics Information Technology, a business unit of
General Dynamics Corporation
), has been awarded a two-year, $6 million task order by the Air
Force Intelligence, Surveillance and Reconnaissance Agency. Per
the order the company would provide technical support services to
the Air Force Joint Worldwide Intelligence Communications System
(AF JWICS) Enterprise. General Dynamics would also help the Air
Force streamline its communications networks and integrate with
national-level Intelligence Community Information Technology
Enterprise (IC ITE) and Desk Top Enterprise (DTE) initiatives.
Under this contract, General Dynamics will deliver a wide range
of information technology (IT) services to support the continued
operations of AF JWICS from numerous service centers. As per the
order the company will assist the government in operating,
maintaining and sustaining the centers. These centers provide
core services to support the Air Force missions worldwide.
Headquartered at Lackland Air Force Base, the Air Force
Intelligence, Surveillance and Reconnaissance Agency provides
integrated, cross-domain ISR capabilities in concert with other
service, joint, national and international partners. The Joint
Worldwide Intelligence Communications System is the Top
Secret/Sensitive Compartmented Information component of the
Defense Information System Network used by the defense
intelligence community to transmit classified multi-media
intelligence communications worldwide.
This task order was awarded under the Defense Intelligence Agency
(DIA) Solutions for the Information Technology Enterprise (SITE)
contract, a multiple-award, indefinite delivery, indefinite
quantity contract awarded in May 2010.
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. The
company operates through four segments: Information Systems &
Technology (IS&T), Combat Systems, Marine Systems, and
General Dynamics was the third largest U.S. defense contractor in
terms of revenue in fiscal 2011, after
The Boeing Company
Lockheed Martin Corporation
). The company is one of two contractors equipped to build
nuclear-powered submarines in the U.S.
Looking forward, key growth drivers for General Dynamics include
the improving business jet market, its stable business of U.S.
military vehicles, a backlog (though declining) of $51.5 billion,
an ongoing share repurchase program and strong cash flow
generation. However, the company is largely tied to the U.S.
defense budget, where the threat of budget cut is high. Also, we
have turned slightly cautious about the company's steadily
dropping order backlog, and risks related to the execution of key
General Dynamics' total order backlog decreased to $51.5
billion at the end of the first nine months of 2012 from $59.6
billion at fiscal-end 2010. Going forward, the U.S. economic
fundamentals are basically being kept on a leash as the
Euro-crisis continues to cast its spell over the financial
markets, keeping risks of further cutbacks in future defense
budgets at a high level. Our apprehension is fueled by $15
trillion of national debt and an unemployment rate hovering
around 7.9% which would lead to the Budget Control Act's dictum
of automatic cutbacks across the board going forward.
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Going by the pulse of the economy and the pros and cons, we
prefer to maintain our long-term Neutral recommendation on the
stock. Moreover, General Dynamics holds a Zacks #3 Rank that
translates into a short-term Hold rating.