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General Dynamics Wins Navy Deal for MK 46 Gun Weapon System

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General Dynamics Corporation’s (GD - Free Report) business unit, Land Systems, recently secured a $25.6-million contract for the production of the MK 46 MOD 2 Gun Weapon System (GWS) for the Littoral Combat Ship (LCS) and Landing Platform Dock (LPD) programs. The contract was awarded by the Naval Sea Systems Command, Washington, DC.

Details of the Deal

Per the deal, General Dynamics’ Land Systems will provide two 30mm GWSs for the LCS Surface Warfare Mission module, two 30mm GWSs for the LPD-29 and LPD-30 each along with additional associated spare parts. Majority of the work related to this deal will be performed in Sterling Heights, MI, and Anniston, AL, while the entire task is expected to be completed by September 2021.

A Brief Note on MK-46 MOD 2 Gun Weapon System

The Mk-46 GWS is a remotely operated naval gun system that uses a 30mm high velocity cannon, a forward-looking infrared sensor, a low light television camera and a laser rangefinder for shipboard self-defense against small, high speed surface targets. The Mk-46 GWS includes the Mk-44 Mod.2 30mm cannon, which is a single barrel, open bolt, dual feed, electrically powered, chain driven automatic cannon.

What Favors General Dynamics?

With widespread geo-political tension around the globe, many nations are strengthening their arsenals and taking initiatives to technologically upgrade weapon systems. This in turn should drive General Dynamics’ growth, as it is one of the major players in the defense space.

Notably, the company’s Combat Systems segment that manufactures GWS, registered $1.64 billion of sales in the first quarter of 2019, reflecting 13.6% year-over-year growth. We may expect the company to witness similar strong results in this segment in upcoming quarters, buoyed by strong demand for its weapon systems, which also led to the latest contract win. This in turn should expand the company’s profit margin.

Looking Ahead

Per Markets and Markets Research, the global artillery system market is expected to reach $13.94 billion by 2022 at a CAGR of 7.23%, primarily driven by increasing demand for artillery systems from the military sector and ongoing worldwide military modernization programs. This, in turn, will increase demand for gun weapon systems and other munitions. As one of the premier defense giants in the United States, General Dynamics is expected to benefit a great deal from such projections, given the huge opportunity for expansion.

Price Performance

Shares of the company have gained 3.4% in a year against the industry’s decline of 3.4%.

Zacks Rank & Key Picks    

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

A few better-ranked stocks in the same sector are Lockheed Martin Corporation (LMT - Free Report) , Leidos Holdings, Inc. (LDOS - Free Report) and Northrop Grumman Corporation (NOC - Free Report) .

While Lockheed Martin sports a Zacks Rank #1 (Strong Buy), Northrop Grumman and Leidos Holdings carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Lockheed Martin came up with average positive earnings surprise of 17.35% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has increased 4.21% to $20.28 in the past 60 days.

Northrop Grumman Corporation delivered average positive earnings surprise of 18.50% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has climbed 1.85% to $19.29 in the past 60 days.

Leidos Holdings came up with average positive earnings surprise of 6.81% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has risen 1.1% to $4.58 in the past 60 days.

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