General Dynamics Corporation
) unit General Dynamics Land Systems-Canada has received a
contract modification worth $133.5 million from the Government of
Canada for the up gradation of 66 more LAV III vehicles.
Per the contract, the up gradation task will include introduction
of double-V-hull technology, as well as armour protection and
The contract is an extension of a previous contract received in
October 2011. In October 2011, General Dynamics had received a
contract worth $1.052 billion to modernize 550 vehicles. With the
current contract, the company will modernize 616 vehicles, which
will, in turn, improve their survivability, mobility and
firepower while broadening the fleet's lifecycle to 2035.
With these up gradations, automotive performance, handling
characteristics and payload capacity of LAV III vehicles will be
optimized with mobility system upgrades. This will includes a
more powerful engine, more robust driveline and suspension, and a
height management system ("HMS").
With this modernization assignment, the 25mm turret's crew
ergonomics will be improved by slotting in larger hatches.
Moreover, its potential will be improved by the addition of the
most modern technologies that will include improved fire control,
thermal, day and low-light sights and data displays.
Additionally, these improvements will provide the crew members
higher security against mine blasts, IEDs and other threats. All
regions of Canada will benefit from this work, and the company
expects the task to be completed in 2017.
General Dynamics Land Systems is a business unit of General
Dynamics Combat Systems. In the third quarter of 2012, Combat
Systems reported revenues of $1.96 billion, down 8.6% year over
year. Total segment backlog was $15.9 billion versus $10.4
billion in the third quarter of 2011.
Moreover, more contracts are continuously flowing in for the
segment. A few days back, the segment received a $395 million
contract for research, development and testing in preparation for
the Abrams main battle tank Engineering Change Proposal 1 (ECP1)
production from the U.S. Army TACOM Contracting Command. Over the
next one-year, the segment has an initial value of $80 million.
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
(Gulfstream) and a stable business for U.S. military vehicles
(Stryker combat vehicles and Abrams tanks).
However, we remain concerned due to the U.S. defense budget,
where the threat of budget cuts is looming. Also, we are slightly
cautious about the risks related to the execution of key
projects. The company 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 Corporation
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.
Some of its main competitors are
Northrop Grumman Corporation
Huntington Ingalls Industries, Inc.
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