The U.S. Defense Department played Santa and delivered a gift Ultralife Batteries (NASDAQ:ULBI) shareholders will cherish for years to come -- an up-to-$286 million five-year contract to supply non-rechargeable lithium-manganese dioxide batteries. It is the largest contract the company has ever won.

Ultralife, with trailing 12-month sales of $104 million, now has solid credibility when it states that it wants to achieve annual revenues of $200 million within three to five years. Wall Street noticed too. The news jump-started the shares to an almost-30% gain in early morning trading.

The stock was battered in June and then again in September when the company gave cautious outlooks for the months ahead because of a dearth of military ordering. While today's news certainly bolsters the revenue outlook, there was no word in today's press release about pricing specifics -- a concern the company has previously mentioned.

The military is trying, said the press release, "...to establish and maintain a production base of a sufficient capacity to timely meet peacetime demands and have the ability to surge quickly to meet deployment demands." Ultralife is now tapped firmly into that procurement objective.

Before the contract specifics were announced today, analysts were expecting the company to earn $0.79 a share next year, which would value the company at 24 times forward earnings. Of course, given today's news and stock price movement, investors will have to wait for the dust to settle before the new valuation shows itself.

Ultralife is a Lilliputian when it comes to consumer battery colossuses like Gillette's (NYSE:G) Duracell, the Energizer (NYSE:ENR) bunny, and Rayovac (NYSE:ROV). But, by focusing on specialty markets like the military and medical companies, it can best leverage its abilities.

Stepping away from this recent contract news, Ultralife has more cash than debt and produced $3.4 million in free cash flow over the last 12 months.

Fool contributor W.D. Crotty does not own stock in any of the companies mentioned. The Motley Fool is investors talking to investors. Join in the discussion of Ultralife Batteries and Gillette, and a thousand other stocks, on the Motley Fool discussion boards.