GD Gets $32M Northrop Contract - Analyst Blog
08 Janvier 2013 - 1:40PM
Zacks
General Dynamics
Corporation (GD) has won a $32 million contract from
Northrop Grumman Corporation (NOC) for
communications network technology for the NATO Alliance Ground
Surveillance (“AGS”) program. Alliance Ground Surveillance is a
NATO programme for acquiring an airborne ground surveillance
capability.
Under the contract, General Dynamics will offer the software
required to control the AGS Communications Ground Control System,
or CGCS. The CGCS will manage radio and satellite communications
between Global Hawk unmanned aerial vehicles and the main operating
base in Sigonella, Italy.
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 (IS&T), Combat Systems, Marine Systems, and
Aerospace.
General Dynamics was the third largest U.S. defense contractor in
terms of revenue in fiscal 2011, after The Boeing
Company (BA) and Lockheed Martin
Corporation (LMT). The company is one of two contractors
equipped to build nuclear-powered submarines in the U.S.
Looking forward, key growth drivers for General Dynamics include
essentially the company’s improving business of jet market, its
stable business of U.S. military vehicles, a backlog (though
declining) of $51.5 billion, 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 cut is
looming large. Also, we have turned slightly cautious about the
company’s steadily dropping order backlog, and risks related to the
execution of key projects.
General Dynamics’ total order
backlog decreased to $51.5 billion at the end of the first nine
months of 2012 from $59.6 billion at fiscal-end 2010. Going
forward, the U.S. economic fundamentals are being effectively kept
on a leash as the Euro-crisis continues to cast its spell over the
financial markets, making them more and more prone to risks of
further cutbacks in future defense budgets. Our apprehension is
further fueled by $15 trillion of national debt and an unemployment
rate hovering around 7.9% which would lead to the Budget Control
Act’s dictum of automatic cutbacks across the board going
forward.
Going by the pulse of the economy and the pros and cons, we prefer
to maintain our long-term Neutral recommendation on the stock.
Moreover, General Dynamics holds a Zacks #3 Rank that translates
into a short-term Hold rating.
BOEING CO (BA): Free Stock Analysis Report
GENL DYNAMICS (GD): Free Stock Analysis Report
LOCKHEED MARTIN (LMT): Free Stock Analysis Report
NORTHROP GRUMMN (NOC): Free Stock Analysis Report
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