Back to top

Analyst Blog

Defense contractor General Dynamics Corp. (GD - Analyst Report) plans to consolidate its Combat Systems business group − General Dynamics Armament and Technical Products − into General Dynamics Ordnance and Tactical Systems. Although the company highlighted that this move would result in significant savings for the company, it refused to provide any financial estimates.

Given the varying demand in some markets and increasing competition, the consolidation aims at boosting both efficiency and profitability. The decision was taken following a broad review of its Combat Systems business group. The company will thus close its armament and technical-products headquarters in Charlotte, N.C., by the end of this year.

The Armament and Technical Products division engages in the designing, development and production of weapon, armament and vehicle-survivability systems for the U.S. military and its associates, as well as composite structures for the commercial, aerospace and defense markets. The business unit also manufactures a wide range of components for commercial trucks, military vehicles and industrial machines. Both units employ about 6,000 workers in the U.S., Canada and in other locations.

The performance of defense operators primarily depends on the orders coming from the national and international defense establishments. U.S. defense budget cuts due to the ongoing sequester is a major cause of concern going forward.

The recent news from the Pentagon regarding plans to slash hundreds of weapons programs and lay off civilian workers make us more apprehensive. The cuts can also lessen spending on procurement and research and development by up to 20%.

Like General Dynamics, other 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.

The company presently retains a short-term Zacks Rank #3 (Hold). However, stocks well placed in the industry are Embraer SA (ERJ - Analyst Report), The Boeing Company (BA - Analyst Report) and Northrop Grumman Corp. (NOC - Analyst Report). While Boeing carries a Zacks Rank #1 (Strong Buy), Embraer and Northrop Grumman hold a Zacks Rank #2 (Buy).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
GTT COMMUNI… GTT 11.65 +4.11%
ALLERGAN IN… AGN 161.82 +3.99%
CLAYTON WIL… CWEI 117.06 +3.73%
GREENBRIER… GBX 69.63 +2.37%
RF MICRO DE… RFMD 12.02 +2.04%