General Dynamics IT Unit Wins $4.4B Defense Cloud Contract

General Dynamics’ business unit General Dynamics Information Technology has been awarded a $4.4 billion enterprise cloud contract by the General Services Administration in partnership with the Defense Department (or DoD) and the Defense Information Systems Agency.

The contract called the Defense Enterprise Office Solutions or DEOS will streamline the DoD’s use of cloud email and collaborative tools while enhancing cybersecurity and information sharing across DoD’s enterprise, General Dynamics (GD) said.

The Defense Department estimates the value of the DEOS Blanket Purchase Agreement (BPA) at $4.4 billion over a 10-year period, which includes a five-year base period with two 2-year options and one 1-year option. (See GD stock analysis on TipRanks)

Under the contract, General Dynamics’ IT will replace legacy DoD IT office applications with an enterprise-wide standard cloud-based solution across all military services worldwide for both unclassified (IL5) and classified (IL6) environments. This will allow DoD users and mission partners to more seamlessly collaborate and share information regardless of their location or DoD organization.

Meanwhile, the Street is sidelined on General Dynamics stock, which offers a 2.9% dividend yield. A Hold analyst consensus is based on 3 Buys, 3 Holds and 2 Sells. With shares down 21.6% year-to-date, the average analyst price target of $155.13 indicates an upside potential of 12.3% in the coming months.  

On Oct.29, Credit Suisse analyst Robert Spingarn lowered his price target for General Dynamics to $140 from $156 and reiterated a Hold rating. Following the company’s mixed 3Q results, the analyst still sees limited scope beyond valuation for the stock to outperform relative to its peers.

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