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General Dynamics' Unit Wins $41M Contract from U.S. Navy

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Defense behemoth General Dynamics Corp.’s (GD - Free Report) business division, Ordnance and Tactical Systems, secured a modification contract worth $40.8 million. According to the deal, the company will manufacture Missile Fire Control System MK 82 director/MK 200 director controller equipment and provide related engineering services. The contract was awarded by the Naval Sea Systems Command, Washington, D.C.

Details of the Deal

Per the agreement, the modification will support and deliver functionally tested Missile Fire Control System MK 82/MK 200 ship sets with no unfavourable impact on scheduled ship deployment necessities for operational use. These components form part of the Missile Fire Control System MK99 framework that is an essential component of Lockheed Martin Corp.’s (LMT - Free Report) Aegis Weapon System.  

The modification covers 60% of the purchases for the governments of the Republic of Korea and 40% for Japan, under the foreign military sales program.

Work related to this deal is scheduled to be completed by Dec 2021. It will be executed in Saco, MN. The company will utilize foreign military sales funds.

A Brief Note on Missile Fire Control System

The Gun and Guided Missile Director MK82 and the Director Controller MK200, produced by Ordnance and Tactical Systems, are components of the Group MK81. Currently, they are being produced for the Aegis Weapon System MK7.

The Antenna Assembly AS-34444/SPG-62 that is produced by Raytheon Co's Equipment Division is mounted on the MK82 by an elevation-over-train pedestal to provide space stabilization for the radar's line of site. The assembly is an unmanned system, which is capable of moving on two axes, train and elevation.

Our Take

General Dynamics Ordnance and Tactical Systems is the leading commercial disposer of explosive materials and devices in the U.S. It is one of the leading manufacturers of mortar weapons and systems, bomb bodies and propellants. This unit falls under the General Dynamics Combat Systems segment.

As a whole, 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. It is the leading tank and artillery ammunition producer providing high-performance ammunition to U.S. armed forces.

Also, its revenue exposure is spread over a broad portfolio of products and services in business aviation; combat vehicles, weapons systems and munitions; shipbuilding design, that helps in keeping overall growth momentum steady.

During the first quarter of 2017, the Combat Systems segment generated 3.4% revenues, higher than the prior-year level. We can expect consistent growth in the segment's top line, moving ahead. The upside will be driven by the strong demand for its products and frequent contract wins like the aforementioned ones.

Price Movement

Shares of General Dynamics have rallied 39.4% in the past one year, outperforming the Zacks categorized Aerospace-Defense industry’s gain of 23.2%. This could be because General Dynamics consistently maintains a strategic alliance with the U.S. Department of Defense that allows it to enjoy a steady flow of contracts. Consistent deal wins also allow its peers like Boeing (BA - Free Report) keep up their industry-leading performance.



Zacks Rank

General Dynamics currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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