3M Secures $92M Body Armor Contract from Defense Logistics

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Ceradyne, Inc., a wholly-owned subsidiary of diversified industrial goods manufacturer 3M Company MMM , recently secured a contract worth $92.7 million from the Defense Logistics Agency to manufacture 177,000 pieces of body armor plates. The company is expected to start production and delivery of the goods shortly.

The Defense Logistics Agency is integral part of the U.S. Department of Defense and operates as its largest logistics combat support agency. It provides logistics support across the globe during both peace and wartime to military and civilian agencies as well as to other countries.

Designed to meet the stringent performance requirements of the U.S. Department of Defense, the body armor plates function as protective gears for soldiers, sailors, airmen and marines. These lightweight enhanced small arms protective inserts are placed inside the outer modular tactical vests of the defense personnel to provide torso protection against small-arms fire.

Such a coveted contract from the defense agency speak volumes about the reliability and trustworthiness of Ceradyne, which has manufactured over 2 million body armor inserts and 100,000 enhanced combat helmets for the U.S. Armed Forces to date. In addition to incremental revenues, the contract strengthened 3M's position as one of the leading defense product manufacturers in the country.

Moving forward, portfolio management, investment in innovation and business transformation are the three key areas on which 3M intends to focus to gain a competitive advantage in the industry. The company also intends to continue investing in capital expenditures, and research and development to support organic growth as it aims at a prudent capital structure strategy and increased capital deployment.

With focused initiatives, 3M expects 8-11% growth in earnings per share during the five-year period between 2016 and 2020 driven by organic sales growth of 2-5%. The company expects about 20% return on invested capital during this tenure with a free cash flow conversion rate of 100%.

3M currently has a Zacks Rank #3 (Hold). Some stocks that look promising in the industry include CLARCOR Inc. CLC , Honeywell International Inc. HON and Koninklijke KPN N.V. KKPNF , each carrying Zacks Rank #2 (Buy).

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This article appears in: Business , Investing , Stocks
Referenced Symbols: MMM , HON , KKPNF

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