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General Dynamics (GD), Partner Win $1.9B Deal for Combat Vehicles

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General Dynamics Corp.’s (GD - Free Report) business unit, General Dynamics Land Systems (“GDLS”), and its joint venture (JV) partner Marshall Canada, recently clinched the Logistics Vehicle Modernization (LVM) contract. The award has been provided by the Canadian Armed Forces (“CAF”).

Details of the Deal

Valued at $1.89 billion, the LVM project is a two-part contract — a vehicle acquisition contract and another in-service support contract over 25 years. Per the terms of the deal, the GDLS-Marchall Canada JV will supply more than 1,000 light trucks and approximately 500 heavy trucks to the CAF.

In addition, the JV will also deliver associated equipment, like armored protection kits, modules, containers and trailers.

What’s Favoring General Dynamics?

Over the past few years, there has been a significant expansion in military spending by nations across the globe. This is because the countries are increasingly focused on modernizing and upgrading their defense systems to meet the current warfare requirements. In such a scenario, the demand for combat vehicles has increased manifold as these form an integral part of any land warfare system.

Such a solid demand trend stands to benefit General Dynamics, with its GDLS unit being a global leader in designing, engineering, producing, supporting and sustaining tracked and wheeled military equipment. Its product portfolio includes the Abrams Main Battle Tank, the Stryker and LAV family of wheeled and specialty vehicles, the AJAX armored brigade of fighting vehicles, and autonomous solutions like the MUTT and S-MET platforms.

Notably, GDLS has been constantly upgrading its combat vehicles with increased survivability, greater firepower, unmatched mobility and enhanced battlefield effectiveness made possible by capabilities and equipment prepared for whatever challenge the military faces.

Undoubtedly, such efforts of GDLS have been ushering in solid contract flow for this unit, like the latest one. This, in turn, is expected to boost its future top-line results.

What Lies Ahead?   

Nations, in recent times, have been investing heftily in advanced armored vehicles, as they offer improved mobility, protection and firepower, to defend their borders against evolving threats such as terrorism and regional conflicts, amid a rapidly changing dynamics of the military landscape.

This must have prompted the Mordor Intelligence firm to project that the global armored fighting vehicles market will witness a CAGR of 5% during 2024-2029. The expanding size of this market should benefit General Dynamics, with its Land Systems unit being the sole-source producer of two renowned lethal tank fleets — the Abrams battle tank and the Stryker wheeled combat vehicle.

Other defense majors that are likely to benefit from the growing global armored fighting vehicles market are BAE Systems Plc (BAESY - Free Report) , Textron Inc. (TXT - Free Report) and RTX Corp. (RTX - Free Report) .

BAE Systems designs, manufactures, upgrades and supports tracked, specialty-tracked, and wheeled and amphibious combat vehicles. Some of its combat vehicles are the Armored Multi-Purpose Vehicle, CV90, CV90MkIV, CV90 IFV, etc.

The company currently boasts a long-term earnings growth rate of 12.2%. The Zacks Consensus Estimate for BAESY’s 2024 sales indicates an improvement of 34.1% from the 2023 reported figure.

Textron’s COMMANDO family of armored vehicles features the ultimate package of combat-proven lethality, survivability, mobility and sustainability. With a wide range of configurations, this vehicle is also a proven ambulance, armored personnel carrier and support utility vehicle.

The company currently boasts a long-term earnings growth rate of 10.1%. The consensus estimate for TXT’s 2024 sales implies an improvement of 5.6% from the 2023 reported figure.

RTX is currently teaming up with a handful of companies like American Rheinmetall Vehicles as well as Textron, L3Harris Technologies and a few more to meet the U.S. Army’s current requirement for a true, next-generation Optionally Manned Fighting Vehicle, namely the Lynx XM30 Combat Vehicle. This is a next-generation, tracked, armored fighting vehicle, designed to address the critical challenges of the future battlefield.

The company currently boasts a long-term earnings growth rate of 10.6%. The consensus mark for RTX’s 2024 sales implies an improvement of 6.2% from the 2023 reported figure.

Price Movement

In the past year, shares of General Dynamics have risen 39.9% against the industry’s 9.9% decline.

Zacks Investment Research
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Zacks Rank

The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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