GD Gets Colombian Contract

General Dynamics Corporation’s ( GD - Analyst Report ) unit General Dynamics Land Systems-Canada has entered into an agreement, worth $65.3 million, with the Colombian Ministry of National Defense to supply 24 Light Armoured Vehicles (“LAVs”).

General Dynamics Land Systems - Canada is a part of General Dynamics Corporation’s Combat Systems business group. This unit provides light armoured vehicle platforms and sub-system integration. It also offers re-role, upgrade and repair services.

The Colombian Ministry of National Defense has ordered the vehicles for the Colombian Army. Per the contract, the company will provide the Colombian Army the LAV III version vehicles. The company expects to complete the deliveries by May 2014.

The LAV III armored vehicle is the latest in the Generation III Light Armored Vehicle (LAV) series. The vehicle has higher load-carrying and protection capacity and double-V hull (“DVH”) technology. This new underbody design enables to protect vehicles and army men, who are inside, from mine blasts, improvised explosive devices (“IEDs”) and several other threats.

Since the introduction, this vehicle has been sold to several domestic as well as international customers. This vehicle has been deployed for numerous operations in the Balkans, Africa and Afghanistan. To date, over 4,200 vehicles have been ordered, with the majority being for the U.S. Army.

In December 2012, the company received a contract, worth $9.5 million, from the Government of Canada to define, analyze and choose an enhanced surveillance suite for integration of Canadian LAV III Upgrade vehicles.

As General Dynamics’ one of the main clients are the U.S. Department of Defense, any cutbacks in the U.S. defense budget could limit the company’s future growth prospects. Due to this factor, the company has already experienced a 9.8% year-over-year drop in third-quarter 2012 total backlog to $9.4 billion. In addition, higher level of competition from a number of players in each of its business segments is our major concern.

General Dynamics’ strong negative factors propel us to have a short-term Zacks Rank #4 (Sell). One of its peers Lockheed Martin Corporation ( LMT - Analyst Report ) has a short-term Zacks Rank #3 (Hold).

Falls Church, Virginia-based 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.