General Dynamics Corp.’s ( GD Quick Quote GD - Free Report) business unit, Land Systems, recently secured a modification contract involving Abrams tank. The award has been offered by the U.S. Army Contracting Command, Detroit Arsenal, MI. Details of the Deal
Valued at $17.7 million, the contract is projected to be completed by Mar 15, 2024. Per the terms of the deal, General Dynamics will offer technical support system for Abrams Tank.
Work related to this deal will be carried out in Sterling Heights, MI.
Significance of Abrams Tank
The M1A2 SEPv3 Abrams is the most advanced main battle tank. It sports features that are technologically advanced in communications, fire control and lethality, reliability, sustainment and fuel efficiency, along with upgraded armor. Additionally, the SEPv3 Abrams is designed to seamlessly accept future upgrades.
What’s Favoring General Dynamics?
Military spending has witnessed an increase in the past few years to modernize and upgrade the defense system to meet the current warfare requirements. In such a scenario, the demand for military tanks has increased by leaps & bounds as these form an integral part of any land warfare system.
General Dynamics stands to benefit from this increased demand. This is because its Land Systems is the sole-source producer of two foundational products of the U.S. Army’s warfighting capabilities — the M1A2Abrams main battle tank and the Stryker wheeled combat vehicle.
The company strives to continuously improvise on the combat vehicle platform and provide an upgraded version to its customers. GD is maximizing the effectiveness and lethality of the Army’s tank fleet with next-generation Abrams upgrades. This will provide technological advancements in terms of communications, power generation, fuel efficiency, optics and armor.
The company is also developing an Abrams SEPv4 configuration with additional advanced capabilities, incorporating next-generation electronic architecture technology. This will allow the platform to adopt and incorporate transformative capabilities in the future.
Such capability in manufacturing combat vehicles must have enabled General Dynamics to win multiple orders for Abrams Tank as well as system and sustainment technical support services contracts involving the same. The latest contract win is a testament to this. These have bolstered the defense giant’s revenue generation prospects from combat vehicles.
Per the report from Markets and Markets, the global armored vehicle market is projected to witness a CAGR of 3.1% by 2027 from 2022. The expanding size of the market should benefit General Dynamics as it has an established position in the aforesaid market.
Other defense majors that are likely to benefit are BAE Systems ( BAESY Quick Quote BAESY - Free Report) , Northrop Grumman ( NOC Quick Quote NOC - Free Report) and Raytheon Technologies ( RTX Quick Quote RTX - Free Report) .
BAE Systems designs, manufactures, upgrades and supports tracked, specialty-tracked, and wheeled and amphibious combat vehicles. Some of its combat vehicles include the Armored Multi-Purpose Vehicle, CV90, CV90MkIV, CV90 IFV, etc.
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.
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.
In the past year, shares of General Dynamics have lost 6.8% compared with the
industry’s 14.8% decline. Image Source: Zacks Investment Research Zacks Rank
General Dynamics currently carries a Zacks Rank #4 (Sell).
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the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.