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General Dynamics Armament and Technical Products, a unit of General Dynamics (GD - Analyst Report) received a contract worth $7.8 million from the Naval Air Systems Command. Per the contract General Dynamics’s unit will be entrusted to manufacture more than twenty F/A-18 E/F 20 mm gun systems for the Super Hornet fighter aircraft.

Production will be carried out at the company’s Saco, Maine facility while the work will be administered from its Technology Center in Williston, Vermont.

The gun system constitutes a lightweight, six-barrel 20 mm M61A2 Gatling gun fitted with a closed-loop rotary linkless feed system. The system can fire up to 6,000 rounds per minute besides acting as the last line of defense.

We believe successive winning of contracts will help the company post a robust top line going forward.

Looking forward, key drivers boosting the results of General Dynamics include the improving jet market business, its stable business of U.S. military vehicles, a backlog of over $57 billion, an ongoing share repurchase program and strong cash flow generation.

However, the company is largely tied to the U.S. defense budget, where there is a looming threat of budget cuts. Also, we have turned slightly cautious of the company’s steadily-dropping order backlog, and risks related to the execution of key projects.

The current Zacks Consensus Estimate for first-quarter 2012 is $1.70 per share. For full years 2012 and 2013, the Zacks Consensus Estimates are $7.37 and $7.82 respectively.

We retain our Neutral recommendation on General Dynamics. The quantitative Zacks #4 Rank (short-term Sell rating) for the company indicates downward pressure on the stock over the near term.

Headquartered in Falls Church, Virginia, General Dynamics Corporation (GD - Analyst Report) 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 competes with The Boeing Company (BA - Analyst Report), Lockheed Martin Corporation (LMT - Analyst Report), Textron Inc. (TXT - Analyst Report).

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