GD Produces Radios for US Military

General Dynamics C4 Systems, a business unit of General Dynamics Corporation (GD - Analyst Report), has received an order for the production of 6,250 Rifleman and 100 Manpack radios from the U.S. Department of Defense. The Low Rate Initial Production (‘LRIP’) order has an initial value of approximately $56.4 million.

The order calls for the production of Joint Tactical Radio System (‘JTRS’) Handheld, Manpack, Small Form Fit (‘HMS’) Rifleman radio (‘AN/PRC-154’) and Manpack (‘AN/PRC-155’) radio.

The JTRS HMS networking radios are the first ground-domain radios that will be fielded by the U.S. military. These meet the full suite of JTRS requirements. JTRS HMS Rifleman radios have gap-filling capabilities that enable soldiers on the battlefield to have secure, mobile voice, video and data communications. The two-channel Manpack radio bridges Rifleman Networks to both legacy and future high-level command networks. The initial 100 Manpack radios will be used for further operational testing to support full-rate production.

For the LRIP order, General Dynamics and Thales Communications will manufacture the Rifleman radios while General Dynamics and Rockwell Collins Inc. (COL - Analyst Report) will build the Manpack radios. The company believes that the Army plans to purchase more than 190,000 Rifleman and approximately 50,000 Manpack radios.

General Dynamics is ranked as the fourth largest U.S. defense contractor in terms of revenue in fiscal 2010 after The Boeing Company (BA - Analyst Report), Lockheed Martin Corporation (LMT - Analyst Report) and Northrop Grumman Corporation (NOC - Analyst Report). The company’s revenue exposure is spread over a broad portfolio of products and services in business aviation; combat vehicles, weapons systems and munitions; shipbuilding design, repair and construction; and information systems, technologies and services that insulate it from risk.

However, the company is largely tied to the U.S. defense budget. We are also slightly cautious about the company’s steadily-dropping order backlog, the recent G650 crash and risks related to the execution of key projects. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.

General Dynamics is expected to release its second quarter 2011 results on July 27, 2011. Going forward, the Zacks Consensus Estimates for second quarter 2011 and fiscal year 2011 are currently at $1.77 per share and $7.13 per share, respectively.

Headquartered in Falls Church, Virginia, 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. General Dynamics C4 Systems is a prime contractor for the JTRS HMS program. The JTRS HMS team includes BAE Systems plc (BAESY), Rockwell Collins and Thales Communications.

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