Yahoo Finance General Dynamics (GD) Wins Deal to Support Abrams Battle Tanks (Revised)
General Dynamics Corp.’s GD business unit, Land Systems, recently clinched a modification contract involving Abrams battle tanks. The award has been offered by the U.S. Army Contracting Command, Detroit Arsenal, MI.
Valued at $17.6 million, this contract is expected to be completed by May 24, 2024. The work related to this deal will be executed in Sterling Heights, MI.
The contract involves foreign military sales to Kuwait and Poland.
Significance of the Abrams Tank
The M1A2 SEPv3 Abrams is the most advanced main battle tank. It boasts features that are technologically advanced in terms of communications, fire control and lethality, reliability, sustainment and fuel efficiency, along with an upgraded armor. The SEPv3 Abrams is also designed to seamlessly accept future upgrades.
What’s Favoring General Dynamics?
Military tanks are the primary offensive weapons in the land mission of the military. An efficient armored military tank enables the army to carry out any mission by direct fire. Moreover, the recent tiff between Ukraine and Russia has accelerated the pace of upgrading the defense landscape with technologically advanced arms and ammunition, which, in turn, has led to increased investments in military tanks.
In this context, it is imperative to mention that the increased focus on technologically advanced combat vehicles is likely to benefit General Dynamics as its Land System business unit is a prime contractor of land combat vehicles for the U.S. Army. It provides innovative design, engineering, technology, production and full life-cycle support for land combat vehicles worldwide.
Its excellence and in-depth experience in building combat vehicles, coupled with a customer-first focus and a seasoned supply-chain network, has been leveraging the company to win multiple contracts from the U.S. Army and its allies. The latest contract win is a bright example of that.
Such an upward trend in demand is likely to bolster GD’s revenue generation prospects from its Land System business unit and boost the company’s overall top line.
Growth Prospects
The changing dynamics of the military landscape and the rising geopolitical tension have made it mandatory for a country to continuously evolve and strengthen its defense structure. To this end, military tanks form an integral part of any combat mission and land warfare affair.
Per a report from Markets and Markets, the global armored vehicle market is projected to witness a CAGR of 3.1% during the 2022-2027 period. Such abounding growth trends indicate ample growth opportunities for General Dynamics as it enjoys a lucrative position in the armored vehicle market.
A few defense primes that can reap the multitude of gains from the expanding armored vehicle market are BAE Systems BAESY, Northrop Grumman NOC and Raytheon Technologies RTX.
BAE System’s Challenger 2 is a heavily armored and highly mobile battle tank, designed for use in the direct fire zone. Its primary role is to destroy or neutralize the armor. It also has the ability to engage both hard and soft targets and can operate across a spectrum of high-intensity conflicts, counter insurgencies and peacekeeping roles.
BAESY’s long-term earnings growth rate is pegged at 13.7%. The Zacks Consensus Estimate for its 2023 sales indicates an improvement of 25.4% from that reported in the previous year.
Northrop Grumman is the world’s top producer of medium-caliber live and training ammunition and gun systems, with more than 5 million units built in the last five years. It specializes in innovating low-cost, highly reliable precise weapons and ammunition for artillery and mortar systems, medium-caliber weapon platforms, battle tanks and individual soldiers.
NOC has a long-term earnings growth rate of 3.8%. The Zacks Consensus Estimate for its 2023 sales indicates an improvement of 4.7% from the year-ago reported figure.
Raytheon is currently teaming up with American Rheinmetall Vehicles to meet the U.S. Army’s current requirement for a true, next-generation Optionally Manned Fighting Vehicle, namely the Lynx Infantry Fighting Vehicle. The Lynx Infantry Fighting Vehicle is a next-generation, tracked, armored fighting vehicle designed to address the critical challenges of the future battlefield.
RTX’s long-term earnings growth rate is currently pegged at 8.3%. The Zacks Consensus Estimate for its 2023 sales indicates an improvement of 8.3% from that reported in 2022.
Price Performance
Shares of General Dynamics have lost 9.2% in the past year compared to the industry’s decline of 5.3%.
Image Source: Zacks Investment Research
Zacks Rank
General Dynamics currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
(We are reissuing this article to correct a mistake. The original article, issued on May 16, 2023, should no longer be relied upon.)
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Northrop Grumman Corporation (NOC) : Free Stock Analysis Report
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