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General Dynamics Corporation's (GD - Analyst Report) subsidiary National Steel and Shipbuilding Company (NASSCO) has received a modification contract, worth $11.2 million, from the U.S. Department of Defense (DoD). Per the agreement, the company will outline exhaustive designs for the adjustment of the Afloat Forward Staging Base (AFSB) on the U.S. Navy’s Mobile Landing Platform (MLP) vessels.

The adjustments of the AFSB will be incorporated in the MLP 3 and MLP 4 vessels. This new variant has an expanded flight deck to operate helicopters and tilt-rotor aircrafts on special operations. This activity will take place at General Dynamics’ facility in San Diego, Calif. and is scheduled to be completed by Nov 2013.

The MLP is a new class of support vessel. The MLP idea was tested by the U.S. Navy through a sequence of at-sea assessments. The ships are 239 meters long with a beam of 50 meters and a design draft of 12 meters. It has sustained speed of 15 knots. The full load displacement of the vessel is 80,000 tons. The navy intends to utilize these vessels for a range of military activities – disaster response, humanitarian support and combat operations.

Earlier, General Dynamics received an MLP contract, worth $744 million, from the U.S. Navy in May 2011 to construct the first two ships – MLP 1 and MLP 2. The company recently handed over MLP 1 to the U.S. Navy and intends to deliver MLP 2 in first-quarter 2014. General Dynamics has already begun work on MLP 3 from Feb 2013.

General Dynamics has a long-standing business association with the U.S. defense establishments and tries to meet its commitments in terms of maintaining products and services standard along with delivery timing. Recently, the company received a cost-plus-fixed-fee modification contract, worth $7.6 million, from the DoD to procure and construct a sea sentry mast and sensor.

The defense operators’ performance primarily depends on the orders coming from the national and international defense establishments. U.S. defense budget cuts due to the ongoing sequester could impact the performance of the defense operators. We believe the defense companies’ effort toward wining more small ticket-size domestic as well as overseas orders will enable them to retain a regular revenue flow.

Moreover, some companies are also repositioning themselves in order to trim operating expenses and streamline their operations. These initiatives will help the defense companies to offset the ongoing headwinds.

General Dynamics currently has a Zacks Rank #3 (Hold). Other stocks from the sector that are presently performing well include The Boeing Company (BA - Analyst Report), Alliant Techsystems Inc. (ATK - Analyst Report) and Exelis, Inc. (XLS - Snapshot Report) with a Zacks Rank #2 (Buy).

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