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GD Bids for US Air Force Contract - Analyst Blog

By: Zacks.com
Posted: 1/18/2013 6:29:00 PM
Referenced Stocks: GD;LMT;NOC

General Dynamics Corporation ( GD ) will collaborate with Finmeccania's subsidiary Alenia Aermacchi to vie for a U.S. Air Force contract for building the advanced T-X trainer jets for an undisclosed amount. The T-X trainer program will come in place of the existing T-38 trainer jets and other training systems. General Dynamics' business arm, General Dynamics C4 systems will be the primary contractor.

General Dynamics will offer its expertise in systems integration and sub-contract management whereas Alenia will deliver the aircraft and provide manufacturing services.

General Dynamics will provide an Advanced Pilot Training ("APT") Family of Systems ("FOS"). The training program comprises flight mockup devices, multi-media classrooms and logistics backing.

To make the bid attractive General Dynamics and Alenia have proposed to build the jets in the U.S. and will utilize as much as U.S. manufactured components and equipment. The U.S. Air Force could order around 350 of these aircrafts.

The General Dynamics lead team will face competition from partners BAE Systems Inc. and Lockheed Martin Corporation ( LMT ) who are also in this contract race. The new training jets will be a modified version of Alenia Aermacchi's current T-100 jet which is an alternative to the current M-346 military jets used for training purposes.

General Dynamics has also bid on a M113 armored personnel carriers upgrade contract for the Danish Army and is the only contender from the U.S. providing options for choosing both wheeled and tracked variants.

Looking forward, with favorable prospects from the jet market, we believe if the contract is awarded to General Dynamics, could act as a growth driver for the company. In addition, the company's stable U.S. military vehicles business and a backlog of orders of $51.5 billion are other potential near-term triggers.

Nonetheless, the possibility of defense spending cutbacks might pose serious challenges to General Dynamics' business goals. The company holds a short term Zacks Rank #3 (Hold).

Another Zacks #3 Ranked defense operator, Northrop Grumman Corporation ( NOC ) also joined forces with Agusta Westland to compete for the U.S. Air Force's combat search and rescue ("CSAR") helicopter deal.

Based in Falls Church Virginia, General Dynamics offers business aviation; combat vehicles, weapons systems, and munitions; military and commercial shipbuilding; and communications and information technology products and services worldwide.



GENL DYNAMICS (GD): Free Stock Analysis Report

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