Force Protection, a unit of
General Dynamics Corporation
), has received a contract worth $73.7 million from United
Kingdom's Ministry of Defense. As per the contract, company will
provide 51 new Foxhound armored patrol vehicles, valued at $1.4
million each, to the Ministry of Defense.
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Foxhound is an improved vehicle with a V-shaped hull that
provides protection against the bombs, which have been a common
tactics of Taliban fighters in Afghanistan. It is a lightweight
mine-protected vehicle, weighing only 7.5 ton. The vehicle being
light weight can be transported to theater aboard a C-17 or C-130
aircraft and even carried on a sling beneath a CH-47 helicopter.
Its turbocharged diesel engine has the capability to reach a
speed of 80 mph. The current contract will bring the total number
of vehicles to 376 for the Army's fleet.
The Foxhound will replace the Army's Snatch Land Rover, which was
weak for roadside bombs used by insurgents in Iraq and
Afghanistan. Snatch Land Rover is a heavy weighted mine
resistant, ambush protected ("MRAP") vehicle developed during the
General Dynamics had acquired Force Protection in December 2011
for $360 million, which became a part of General Dynamics' Land
Systems. Force Protection's portfolio includes the Buffalo mine
clearance vehicle, the Cougar Mine Resistant Ambush Protected
(MRAP) and the smaller Ocelot light patrol vehicle.
The acquisition of Force Protection has boosted General Dynamics,
going forward. This is evident from the current contract as well
as General Dynamics' announcement that its Land Systems unit is
building a new "Super Buffalo" mine-sweeping vehicle in order to
improve the existing Buffalo system created by Force Protection.
Off-late, the company has made several acquisitions. In September
this year, the company completed the acquisition of Open Kernel
Labs, Inc. (OK Labs), which has become a part of General
Dynamics' C4 Systems. OK Labs is a leading provider of
virtualization software for securing wireless communications,
applications and content for mobile devices and automotive
in-vehicle infotainment systems. The acquisition has enhanced the
company's capabilities as a provider of secure mobile devices for
all its customers as well as in-vehicle infotainment systems
(IVI) for the commercial market.
Prior to this, the company had completed the acquisition of
Fidelis Security Systems, Inc. in August 2012. Fidelis is a
market leader in cyber security tools that provide real-time
network visibility, analysis and control. Like Force Protection,
going forward, the acquisition of these units would also be
beneficial for the company.
We view General Dynamics as a well-run company that is likely to
continue delivering on expectations, driven by revenue growth,
margin expansion and cash flow generation. Looking forward, key
drivers include a reviving business jet market business and a
stable business for the U.S. military vehicles.
However, we believe that the fortunes of the company are largely
tied to the U.S. defense budget, where the threat of budget cuts
is looming. Also, we have turned slightly cautious about the
risks related to the execution of key projects.
Like its peers,
Northrop Grumman Corporation
Lockheed Martin Corporation
), General Dynamics presently retains 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
company operates through four segments: Information Systems &
Technology Combat Systems, Marine Systems, and Aerospace.