General Dynamics in Trident Club

General Dynamics Corp.’s (GD - Analyst Report) business unit General Dynamics Advanced Information Systems has been awarded a contract to produce integrated circuits for the U.S. Navy's Trident II (D5) ballistic missile program. This is a three-year contract with a total potential value of $110 million. The multimillion dollar contract also maintained its brisk pace in order booking of General Dynamics. In the recent quarter, the company took the total backlog to $66.2 billion, compared to $60.5 billion in the year-ago quarter.
 
The principle subcontractor to General Dynamics in the contract is Honeywell International Inc. (HON - Analyst Report). Work on the contract will be performed at General Dynamics’ Plymouth, Minnesota, facility.
 
The contract is part of the Navy's TRIDENT Life Extension Electronic Parts Program (LEEPP). LEEPP’s primary contractor is Lockheed Martin Corp. (LMT - Analyst Report). The program is designed to extend the service life of the TRIDENT submarine and the Trident II (D5) missile.
 
General Dynamics engages in mission-critical information systems and technologies; land and expeditionary combat vehicles, armaments and munitions; shipbuilding and marine systems; and business aviation. The company operates through four segments − Information Systems & Technology (IS&T), Combat Systems, Marine Systems, and Aerospace.
 
We view General Dynamics as a well-run company that is likely to continue to deliver on expectations driven by strong revenue growth, margin expansion and cash flow generation. Strong defense outlays should further improve the company’s outlook for shareholders while an increasing funded backlog and an improving balance sheet signal additional positive factors for the company.

We maintain our Neutral recommendation on the shares.

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