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General Dynamics (GD) Wins Deal to Manufacture M1A2 Tanks

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General Dynamics Corp.’s (GD - Free Report) business unit, Land Systems recently clinched a contract worth $4.62 billion for manufacturing Abrams M1A2 SEPv3 tanks. The deal has been awarded by the U.S. Army Contracting Command, Detroit Arsenal, MI.

Work related to the contract is expected to get completed by Jun 17, 2028.

A Brief Note on Abrams Tank System

General Dynamics' Abrams M1A2 is the advanced version of the M1A1 battle tank, which includes a commander's independent thermal viewer, weapon station, position navigation equipment, and a full set of controls and displays, connected by a digital data bus. M1A2 is equipped with an improved fire control system due to these upgrades. The Abrams Tank System continues to be the top tank choice for the U.S. Army, National Guard and Marine Corps as well as several U.S. allies.

Solid Demand for MBTs

Nations are developing advanced new generation main battle tanks (MBTs) to equip their militaries amid rising geopolitical tensions. Notably, General Dynamics’ Abrams battle tank is one such tank and thus its demand continues to soar.

Apart from the solid demand that this tank enjoys on the domestic front, it has a robust customer base overseas. Major international militaries of nations like Egypt, Kuwait, Saudi Arabia, Australia and Iraq are the primary customers of the Abrams battle tanks. Therefore, General Dynamics consistently witnesses solid contract flow for Abrams from Pentagon and other U.S. allies. The latest contract win is a bright example of that. In November 2018, the Moroccan government revealed its plans of purchasing 162 Abrams MBT’S worth $1.25 billion, while in January 2019 the U.S, Army awarded a $714 million contract to

General Dynamics for upgrading 174 M1A1 Abrams tanks to M1A2 SEPv3 configuration. Such developments will certainly enable General Dynamics to expand its share in the global market for military tanks.

Prospects

Per a report by Mordor Intelligence, the MBT market is expected to register a CAGR of more than 3% during 2020-2025. Such growth prospects of the MBT market will surely benefit manufacturers of such battle tanks like General Dynamics, BAE Systems Plc (BAESY - Free Report) and Hyundai Rotem - part of Hyundai Motor Group (HYMLF - Free Report) .  

Price Performance

Shares of General Dynamics have plunged about 18.1% in a year compared with the industry’s decline of 26.9%.

Zacks Rank & A Key Pick

General Dynamics currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the same industry is Textron Inc. (TXT - Free Report) , which holds a Zacks Rank #2 (Buy) You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Textron delivered positive earnings surprise of 54.24%, on average, in the last four quarters. The Zacks Consensus Estimate for 2021 earnings indicates annual growth of 44.2%.

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