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General Dynamics' Unit Wins $109M Deal for Hydra Rockets

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Military shipbuilder General Dynamics Corporation’s (GD - Free Report) business unit, Ordnance and Tactical Systems (‘’OTS’’), secured a modification contract worth $109.2 million for procuring Hydra rockets. Work related to this deal is scheduled to be over by Mar 31, 2020.

The contract has been awarded by the U.S. Army Contracting Command, Redstone Arsenal, AL. The company will carry out the procurement task at Williston, VT. Fiscal 2015, 2016 and 2017 aircraft procurement funds as well as fiscal 2015, 2016 and 2017 other funds will be utilized to complete the work.  Notably, fiscal 2010 foreign military sales funds will also be used.

A Brief Note on Hydra Rockets

Hydra rockets, better known as Hydra-70, represent a family of 2.75-inch unguided rockets that offer several warhead configurations. They can be used for point and area targets. The missiles are part of a lethal yet lightweight weapon system with multi-mission capability like anti-material, anti-personnel, air-to-ground suppression and illumination.

The rocket system can be installed on most of the rotary and fixed-wing aircraft. Incidentally, it is the most commonly used helicopter-launched weapon system in the world.

Our View

With the meteoric rise of the Islamic State of Iraq and Syria (ISIS) over the last few years and more developing nations increasing their share of defense spending, the global market for defense equipment has been on growth trajectory. This, in turn, has provided a solid impetus to sales in the U.S. Aerospace-Defense industry, with the nation being the largest weapon supplier.

Being one of the major players in the defense business, General Dynamics boasts a diverse product and service portfolio along with a wide customer base. In North America, the company maintains a market-leading position in the supply of Hydra-70 rockets, in munitions space. Thanks to the significant demand for this high-end rocket system, General Dynamics has produced more than four million Hydra-70 rockets since 1996. The latest modification contract indicates this production number to increase substantially in coming days, which in turn will boost the company’s growth trajectory.

According to a recent report by Transparency Market Research, the global rockets and missiles market is expected to reach a value worth $43 billion by 2025, reflecting a CAGR of 3.2% from 2016. Therefore, the time is ripe to add the top companies in this market space like General Dynamics, Lockheed Martin Corporation (LMT - Free Report) , Raytheon Company (RTN - Free Report) and Northrop Grumman Corporation (NOC - Free Report) , in your watchlist now.

Price Movement

Shares of General Dynamics have rallied 32.5% over a year, underperforming the industry’s gain of 49.3%. This may have been caused by the earlier budget cuts inflicted by the U.S. government in the defense space.

 

 

Zacks Rank

General Dynamics currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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