General Dynamics (GD) Wins Deal to Manufacture M1A2 Tanks
General Dynamics Corp.'s GD business unit, Land Systems, recently closed a $ 4.62 billion contract to manufacture Abrams M1A2 SEPv3 tanks. The deal was awarded by the US Army Contracting Command, Detroit Arsenal, MI.
The contractual work is expected to be completed by June 17, 2028.
A quick note on the Abrams Tank System
General Dynamics' Abrams M1A2 is the expanded version of the M1A1 main battle tank that includes a commander's independent thermal viewer, weapon station, position navigation equipment, and a full set of controls and displays linked via a digital data bus. Due to these improvements, the M1A2 is equipped with an improved fire control system. The Abrams tank system continues to be the first choice for the U.S. Army, National Guard, and Marine Corps, as well as several U.S. allies.
Solid demand for MBTs
Nations are developing advanced new generation Main Battle Tanks (MBTs) to arm their militaries in the face of mounting geopolitical tensions. The General Dynamics Abrams Main Battle Tank in particular is one such tank, and therefore its demand continues to grow.
Aside from the solid domestic demand this tank enjoys, it has a robust overseas customer base. Major international militaries from nations like Egypt, Kuwait, Saudi Arabia, Australia and Iraq are the main customers of Abrams main battle tanks. As such, General Dynamics has consistently witnessed a solid contract flow for Abrams from the Pentagon and other US allies. The recent order win is a good example of this. In November 2018, the Moroccan government announced plans to purchase 162 Abrams MBT valued at $ 1.25 billion, while the U.S. Army placed an order for $ 714 million in January 2019
General dynamics for upgrading 174 M1A1 Abrams tanks to the M1A2 SEPv3 configuration. Such developments will certainly enable General Dynamics to expand its share of the world market for military tanks.
According to a report by Mordor Intelligence, the MBT market is projected to experience a CAGR greater than 3% in the period 2020-2025. Such growth prospects for the MBT market will certainly benefit manufacturers of such battle tanks as General Dynamics, BAE Systems Plc BAESY and Hyundai Rotem - part of the Hyundai Motor Group HYMLF.
Value for money
General Dynamics stocks are down roughly 18.1% in a year, compared to the industry's 26.9% decline.
Zacks Rank & A Key Pick
General Dynamics currently has a Zacks Rank 3 (Hold). One stock that ranks better in the same industry is Textron Inc. TXT, which holds a Zacks Rank 2 (Buy). The full list of today's Zacks Rank 1 (Strong Buy) can be found here.
Textron achieved a positive earnings surprise averaging 54.24% in the last four quarters. The Zacks consensus estimate for the 2021 result shows annual growth of 44.2%.
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