Force Protection

(FRPT) - Get Report

is finding that bragging rights aren't enough anymore.

Thanks to a new contract announced this week, the company once again ranks as the largest supplier of vehicles under the government's multibillion-dollar mine-resistant ambush-protected, or MRAP, vehicle program. But it seems that investors longed for an even bigger award, so they pushed shares of Force Protection down 5.6% Wednesday.

On the surface, at least, the news looked good. Late Tuesday, Force Protection captured a $221 million contract to provide the military with 455 vehicles under the high-stakes MRAP program. Together with an earlier $490 million award, the new win re-established Force Protection as the top supplier of MRAP vehicles to soldiers fighting in the war on terror.

Force Protection briefly lost that title when


( NAVZ) -- viewed as long-shot contender by many -- snagged a $623 million MRAP order three weeks ago. Force Protection shares MRAP sales with joint-venture partner

General Dynamics

(GD) - Get Report


Given high hopes for Force Protection -- which has long been expected to monopolize the MRAP program -- Wednesday's stock action made sense. Notably, just last week, Thomas Weisel Partners analyst David Gremmels predicted that Force Protection would field a call for as many as 2,200 MRAP vehicles -- about five times the number now being ordered -- during the June-July time frame.

At a minimum, Gremmels estimated that Force Protection would need to secure orders for 1,000 additional MRAP vehicles this summer in order to support its current ramp up in production. Still, despite this week's smaller contract size, Gremmels expects Force Protection to land additional MRAP business and go on to hit that target.

"We believe that Tuesday's order came from the remaining funds of one service's supplemental MRAP budget, accounting for its size relative to other recent orders," Gremmels explained. "As additional supplemental and reprogrammed dollars start to become available in the next few weeks, we expect the FRPT/GD joint venture to maintain its 50%-plus share of total MRAP contracts."

For its part, Force Protection said that it "of course" expects further orders to support its production goals as well.

Gremmels reiterated his overweight recommendation on Force Protection in the meantime. He values the stock at $33 to $36 a share. His firm makes a market in the company's securities.

Yet even Gremmels foresees possible setbacks ahead.

"We continue to expect two more competitors to make it through testing and win significant MRAP awards within the next few weeks," he wrote on Tuesday. "We believe most investors expect this, but the contract announcements could have a short-term negative impact on FRPT anyway.

"The timing of these orders relative to the next

Force Protection order is difficult to predict, possibly affecting FRPT/GD's short-term order share and making it challenging to determine the optimal near-term entry point for the stock."

Together, Gremmels calculates, Force Protection and General Dynamics have secured 56% of the MRAP orders placed so far. Navistar by itself boasts 36% of current MRAP orders.

Navistar is supplying the military with 1,200 Category I vehicles under its big MRAP contract. Meanwhile, on Tuesday, the company was asked to provide 16 larger Category II vehicles as well. Force Protection currently dominates the Category II MRAP market.

While admittedly small, Navistar's new Category II order could pose a new threat to Force Protection. Certainly, Navistar itself expects to keep grabbing additional market share.

"We surprised many people when we were awarded the contract for 1,200 Category I MRAP vehicles last month," said Archie Massicotte, president of Navistar's international military and government division. "But our mission isn't accomplished. ... We are leveraging our expertise in commercial truck design, our immediate production capacity at our U.S. facilities, our armoring partnerships and our global support network to provide the best mine-resistant vehicle for our men and women serving overseas."