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General Dynamics Corp.’s (GD - Analyst Report) business wing General Dynamics Armament and Technical Products has received a U.S. Army modification contract worth $67.5 million for the production of Hydra-70 air-to-ground rockets. With this contract extension, the total value of the contract exceeds $1 billion.

In Feb 2013, the company had received a contract worth $224 million for the production of Hydra-70 air-to-ground rockets and for engineering services in support of the Hydra-70 rocket program.

General Dynamics Armament and Technical Products is the system integrator of the Hydra-70 family of rockets. The 2.75-inch diameter rockets have two major parts: the MK66 rocket motor and cargo warheads to employ against targets. In addition, these rockets provide the user with a fatal and lightweight weapon system with multi-mission capacity.

Hydra rockets can be used on most helicopters and some fixed wing aircraft. These rockets employ a variety of warheads in order to meet a wide range of mission requirements for all departments of the U.S. military and select allies.  The deliveries of the Hydra rockets are expected to be accomplished by 2015 end. The Army Contracting Command in Redstone Arsenal, Ala. is the contracting authority.

General Dynamics’ revenue exposure is spread across a broad portfolio of products and services that keep the overall growth momentum steady. Last month, the company posted strong second quarter results on the back of a steady flow of orders and an effective cash deployment strategy. The company received orders for every Gulfstream aircraft model which reflects continued demand across its portfolio of business-jet products.

The company strives to retain its competitive edge and drive profitability in its businesses.  Recently, the company announced that General Dynamics Armament and Technical Products will be consolidated into General Dynamics Ordnance and Tactical Systems. General Dynamics Ordnance and Tactical Systems is a unit of Combat Systems.

Despite these positives, we prefer to remain on the sidelines given the threat of the ongoing sequester impacting the performance of the company like all other defense majors. The company presently retains a short-term Zacks Rank #3 (Hold).

Among the stocks worth considering in the space are Lockheed Martin Corp. (LMT - Analyst Report), Northrop Grumman Corp. (NOC - Analyst Report) and Huntington Ingalls Industries, Inc. (HII - Snapshot Report), all with a Zacks Rank #2 (Buy).


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