Defense and aerospace company General Dynamics Corporation (GD) said that one of its business units has received a $37 million contract to demilitarize and recycle weapons and munitions for the U.S. Army.
The contract awarded to General Dynamics’ Ordnance and Tactical Systems unit has a potential value of roughly $163 million extending for a five-year period. Under the contract, the U.S. Army Contracting Command in Rock Island requires General Dynamics to disarm different types of munitions including high explosive bombs, conventional munitions, fuzes, explosive D bombs and ammunition ranging from 25mm to 106mm caliber guns.
General Dynamics said the demilitarization process involves the separation of the munitions' elements, such as explosives, metal parts and plastics. After separation, nearly 95% of the materials from them will be recycled while the remaining will be destroyed through a safe thermal treatment process.
Disarming the aged munitions is an important part of the lifecycle management of the U.S. ammunition stockpiles. General Dynamics has been the prominent commercial provider of these services to the U.S. Defense Department for over 15 years. The company has a long legacy of on-time execution in ammunition disarming and recycling.
General Dynamics is scheduled to report its first quarter 2011 earnings results before market opens on April 27, 2011. The Zacks Consensus Estimate for the first quarter is earnings of $1.61 per share, up from $1.54 earned in the year-earlier quarter.
For full year 2011, the Zacks Consensus Estimate stands at $7.13 per share, representing a 4.60% increase from the prior-year earnings of $6.82 per share. The full year 2012 earnings estimate is currently $7.67.
Based in Falls Church, Virginia, General Dynamics is one of the leading companies in business aviation, information systems and technologies, shipbuilding and marine systems, and land and amphibious combat systems, as well as armaments and munitions. General Dynamics is the fourth largest U.S. defense contractor after The Boeing Company (BA), Lockheed Martin Corporation (LMT) and Northrop Grumman Corporation (NOC) based on revenue earned in fiscal 2010.
We view General Dynamics as a well-run company that is likely to continue delivering on expectations, driven by revenue growth, margin expansion and cash flow generation. However, an uncertain political landscape makes future defense budgets vulnerable to cutbacks. The falling order backlog is also a headwind for the company.
General Dynamics presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.
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