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General Dynamics Wins $367M Army Deal for Upgrading Stryker

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General Dynamics Corporation’s (GD - Free Report) business unit, Land Systems, recently secured a $366.8-million modification contract for upgrading Stryker flat-bottom vehicles to the patented Double V-Hull design, per its new Proposal 1 configuration plan. The contract was awarded by the U.S. Army Contracting Command, Warren, MI.

Work related to the deal will be performed in Sterling Heights, MI, and is expected to get completed by Apr 30, 2021. General Dynamics will utilize fiscal 2018 and 2019 procurement of weapons and tracked vehicle funds for completing the task.

A Brief Note on Stryker Land Vehicle

The eight-wheeled, armored combat vehicle is powered by a 350 horsepower Caterpillar JP-8 diesel engine that provides the U.S. Army with an effective mix of capabilities, including infantry transport, offensive firepower and reconnaissance. The Stryker's other capabilities include the anti-tank guided missiles, mobile C4ISR, engineering and fire support, mobile gun system, and medical evacuation.

The vehicle’s new Double V-Hull design leads to staggering improvements in soldier survivability, providing protection in open terrains.

What Favors General Dynamics?

With widespread geo-political tension around the globe, many nations are strengthening their arsenals and taking initiatives to upgrade land-combat military vehicles. This, in turn, should boost General Dynamics’ growth, with the company being one of the major players in the wheeled military vehicle market.

Notably, the fiscal 2019 defense budget, approved by the U.S. Senate in June 2018, provisions for a spending plan of $5.8 billion on Ground Systems. Such robust budgetary allotments must have encouraged Pentagon to offer awards related to wheeled combat and armored vehicles to prominent defense contractors like General Dynamics. The latest contract win is a bright example of that.

Looking Ahead

Per Markets and Markets, the Global Armored Vehicles Market is expected to see a CAGR of 5.6%, from 2016-2021. Such growth can be attributed to the rise in commercial security awareness, which, in turn, will increase the
demand for personnel armored vehicles over the period. Alongside rising incidences of armed conflicts, violence and terrorism, increasing defense budgets, particularly in Asia-Pacific and the Middle East, are also anticipated to drive growth. Such prospective growth should enable General Dynamics to significantly grow in the expanding market.

Price Movement

General Dynamics’s stock has lost 3.3% in the last year against its industry’s growth of 23%. The underperformance may have been caused by the intense competition the company faces in the aerospace-defense space.



Zacks Rank & Stocks to Consider

General Dynamics currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the same sector are Heico Corporation (HEI - Free Report) , Wesco Aircraft Holdings (WAIR - Free Report) and Huntington Ingalls Industries (HII - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Huntington Ingalls pulled off an average positive earnings surprise of 9.48% for the trailing four quarters. The Zacks Consensus Estimate for 2018 earnings has moved 6.4% north to $17.24 in the last 90 days.

Heico Corporation came up with an average positive earnings surprise of 2.15% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen 2.73% to $1.88 in the last 90 days

Wesco Aircraft delivered an average positive earnings surprise of 1.10% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has moved up 2.6% to 79 cents in the last 90 days.

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