General Dynamics Corporation (GD) plans to repurchase up to 10 million shares of the company's issued and outstanding common stock on the open market.
In the first six months of 2011, the company repurchased 14.2 million of outstanding shares on the open market at an average price of $73 per share. At second quarter 2011 end, the company had approximately 5.8 million authorized shares remaining for repurchase.
General Dynamics continues to deploy its cash to repurchase common stock, pay dividends and fund capital expenditures. In March this year, the company increased its quarterly dividend from 42 cents per share to 47 cents per share.
In a separate development, General Dynamics Land Systems, a business unit of the company, received a $243 million contract from the U.S. Army TACOM Lifecycle Management Command for the production and delivery of an additional 115 Stryker combat vehicles equipped with double-V hulls (“DVHs”).
Till date, approximately 300 double-V-hulled Stryker vehicles have already been delivered under a contract awarded in July 2010 for the production of 450 double-V-hulled vehicles. Basically, the double-V hull was developed in order to provide increased protection for Stryker-borne soldiers from the effects of roadside mines and improvised explosive devices.
Per the new contract, the company will also provide production sustainment support and obsolescence management services. The six variants under which the company will deliver the double-V hulled Stryker vehicles are Infantry Carrier, Medical Evacuation Vehicle, Engineers Squad Vehicle, Fire Support Vehicle, Commanders Vehicle and Mortar Carrier Vehicle. The company expects the delivery to be completed by September 2012.
Besides providing versatility, mobility and survivability, the Stryker family reduces the Army's logistics footprint and minimizes costs. The Stryker is fast with a speed of more than 60 mph. It is light in weight and is smaller and more readily deployable in comparison to any other Army combat vehicle.
Key drivers of growth for the fourth largest U.S. defense contractor in terms of revenue in fiscal 2010 include the reviving fortunes for the Gulfstream business, its stable business of U.S. military vehicles, 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 cuts is looming high. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.
Headquartered in Falls Church, Virginia, General Dynamics is a market leader in business aviation; land and expeditionary combat systems, armaments and munitions; shipbuilding and marine systems; and information systems and technologies. The company mainly competes with The Boeing Company (BA) and Textron Inc. (TXT).
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