October 11, 2007: The Army - what's up with new stuff and stock picks

Sometimes information just falls on your lap. The annual Association of the United States Army (AUSA) conference was held in Washington, DC yesterday. This is the largest ground symposium of the year. As other services are in attendance because of system overlap, their informed views are of importance to some defense stock pickers.

Here is what I gleaned.

Contractors have submitted bids for the MRAP 11 program, including CRDN/OSK, Blackwater and FRPT (Cheetah vehicle). The Army, importantly, is allowing MRAP 1 contractors to modify their vehicles for competition in the stage two procurement. Troops will be relieved to know that the Army has an in-house developed solution to the Iran-manufactured explosively armed penetrators. Some contractors such as BAE and FRPT have their own solutions. FRPT is considered the most versatile, as it can outfit different classes of vehicles.

Likely winners of the MRAP 11 awards will be FRPT/GD, NAV and BAE. NAV's armor is provided by an Israeli firm, Plasan Sasa. CRDN/OSK may be in line to win a later award (Jan/Feb.). Most of the MRAP prototype vehicles are now at the Aberdeen Proving Grounds in Maryland. Nine companies delivered vehicles.

The JLTV program is still grinding forward. Next spring two-four prototype awards could be made.

The DCPs CIVPOL contract has been extended to February and there is a chance it will not be re-bid at all. The LOGCAP IV program is on hold as two companies that protested the award had their protests upheld by the GAO, through this has not been revealed publicly (at least until now). The Army will probably just add the two contractors and proceed forward.

The Boeing C-17 program is proceeding ahead with ten on order. Money is still tight on the Senate side. The House gave Boeing the appropriate funds to work with. The C-17 is designed to land on unimproved runways - quite a feat for a large aircraft.

The CREW 3.1/3.2 award is funded through 2009.

Stocks: All recommended for examination

Boeing (BA)
Ceradyne (CRDN)
Dyncorp (DYN)
Force Protection (FRPT)-- getting its production ramped up
General Dynamics (GD)
Oshkosh (OSK)
Shaw Group (SGR)