General Dynamics Corp.’s (GD - Free Report) subsidiary, Ordnance and Tactical Systems, Inc. recently secured a hybrid contract worth $3.42 billion to offer production and engineering services for Hydra rockets. The deal was awarded by the U.S. Army Contracting Command, Redstone Arsenal, AL.
The contract is projected to get completed by Sep 30, 2026.
Advantages of the Hydra-70 Rockets
General Dynamics' Hydra-70 rockets include unitary and cargo warheads for use against point and area targets, providing the user a lethal and lightweight weapon system with multi-mission capability. The Hydra-70 rockets are universally compatible with the Advanced Precision Kill System (APKWS).
Fitted to the MK66 MOD 4 motor, these warheads provide low-cost munitions capable of area suppression and defeating threats at extended ranges, as well as providing battlefield obscuration, illumination and marking.
These rockets provide military personnel with affordable firepower, matched to the mission for effective engagements and area suppression of a long list of lower-value targets on the battlefield. These advanced rockets can also be mounted on most of the rotary and fixed-wing aircraft, which include F-16, Boeing’s (BA - Free Report) Apache andTextron’s (TXT - Free Report) Cobra jets.
What’s Favoring General Dynamics?
As widespread geo-political tensions loom across the globe, many nations are strengthening their arsenals and taking significant initiatives to upgrade rocket systems. This, in turn, should boost General Dynamics’ overall growth in the rocket and missile market.
Notably, General Dynamics' Combat Systems segment that manufactures and supplies Hydra-70 rockets, registered $1.71 billion of sales in the first quarter of 2020, reflecting 4.4% year-over-year growth. We may expect General Dynamics to witness similar strong results in this segment in the upcoming quarters as well, buoyed by strong demand for its combat-proven rocket systems, eventually leading to contract wins like the latest one. This, in turn, should expand the company’s profit margin.
Moreover, the fiscal 2021 defense budget proposal provisions for a spending plan of $1.2 billion for the Guided Multiple Launch Rocket System. Such robust budgetary allotments should aid General Dynamics in acquiring major contracts from the Pentagon, related to its various rocket systems.
The global rocket and missile market is projected to witness CAGR of 3.6% during 2019-2027 period, with North America primarily dominating the space (per the latest report by Transparency Market Research firm). This, in turn, should not only benefit General Dynamics but also other U.S. missile players like Raytheon Technologies (RTX - Free Report) and Lockheed Martin to enhance their shares in the aforementioned market.
Price Movement & Zacks Rank
General Dynamics’ stock has lost 7.7% in the past year compared with its industry’s decline of 22.9%.
The company currently has 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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