Wideband Contract for General Dynamics

C4 Systems, a business unit of General Dynamics Corporation (GD - Analyst Report), has received a five-year, indefinite delivery, indefinite quantity contract from the U.S. Navy's Space and Naval Warfare Systems Center, to support, maintain and add new capabilities to the Wideband Networking Waveform (“WNW’). The WNW Software In-Service Support contract has a maximum potential value of $64.5 million, if all options are exercised.

Wideband Networking Waveform is a part of the Joint Tactical Radio System (“JTRS”). Due to its bandwidth capacity, it is capable of moving large amounts of data through the U.S. military's tactical network to the tactical edge network quickly and efficiently.

A waveform helps in transporting information through a network including the physical signal, the protocols, the security and the routing functions. Planned WNW enhancements include increased scalability and throughput, adding capability for commanders.

JTRS is a software-defined radio that works with many existing military and civilian radios. It includes integrated encryption and Wideband Networking Software to create mobile ad hoc networks (“MANETs”).

General Dynamics’ C4 Systems is the prime contractor for the JTRS Handheld, Manpack, Small Form Fit radio program.  Key drivers of growth for the company include the reviving fortunes for the business jet market, its stable business of U.S. military vehicles, an ongoing share repurchase program and strong cash flow generation.

However, the company is largely tied to the U.S. defense budget, where the threat of budget cuts is looming high. Also, we have turned slightly cautious about the company’s steadily dropping order backlog, as well as 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.

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. The company operates through four segments: Information Systems & Technology, Combat Systems, Marine Systems, and Aerospace. The company mainly competes with The Boeing Company (BA - Analyst Report) and Lockheed Martin Corporation (LMT - Analyst Report).

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