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Electro Optic Systems (ASX:EOS) share price surges higher on $94 million government contract

View of hand holding pen signing new deal with glasses sitting on table next to contract papers
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The Electro Optic Systems Hldg Ltd (ASX: EOS) share price is surging higher on Wednesday morning following the release of a positive announcement.

At the time of writing the aerospace and defence-focused technology company’s shares are up 7% to $5.94.

This compares to a 0.7% decline by the S&P/ASX 200 Index (ASX: XJO).

What did Electro Optic Systems announce?

Investors have been buying the company’s shares today after it provided an update on the contract negotiations it entered into with the Commonwealth of Australia in July for the acquisition of 251 Remote Weapon Stations and related materiel.

According to today’s release, the company has completed contract negotiations with the government for the aforementioned weapon stations.

The release explains that the contract is valued at over $94 million. Management notes that it will not only enhance Australian Army capability and secure EOS’ supplier base, it will also boost Australian jobs and create opportunities for small businesses.

The contract finalisation includes $28.5 million of cash flow to Electro Optic Systems in the fourth quarter of 2020. This will assist in securing the EOS Australia supply chain, consisting of 146 small businesses and over 1,100 employees.

It also advised that the 251 Remote Weapon Stations will be integrated on to Bushmaster and Hawkei protected mobility vehicles. Forty Remote Weapon Stations are scheduled for delivery in the fourth quarter of 2020, with the remainder to be delivered in 2021.

What are Remote Weapon Stations?

Electro Optic Systems’ offers a wide range of fully stabilised remotely operated weapon stations that can be integrated onto various vehicle platforms and used for different mission profiles.

Its remote weapon systems ensure full weapon readiness while the crew operate the system protected within the vehicle. All its stations have been designed with a high level of commonality and modularity to offer users a flexible firepower solution.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Electro Optic Systems Holdings Limited. The Motley Fool Australia has recommended Electro Optic Systems Holdings Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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