General Dynamics (GD) Wins a $94M Deal to Build M1A2 Tanks

·3-min read

General Dynamics Corp.’s GD business unit, Land Systems, recently secured a contract involving the M1A2 Abrams tank. The deal has been awarded by the U.S. Army Contracting Command, Detroit Arsenal, MI.

Valued at $93.5 million, the contract is expected to get completed by Sep 30, 2025. Per the terms, General Dynamics will conduct the production, manufacturing, design and engineering of the M1A2 Abrams.

Work related to this deal will be executed in Lima, OH.

Solid Demand for MBTs

Nations worldwide are developing advanced new generation main battle tanks (MBTs) to equip their militaries amid rising geopolitical tensions. General Dynamics’ Abrams battle tank is one such tank and thus its demand continues to soar.

Apart from solid demand on the domestic front, this program has a robust customer base overseas. Major international militaries of nations like Egypt, Kuwait, Saudi Arabia, Australia, and Iraq are the primary customers of Abrams battle tanks. Therefore, General Dynamics witnesses solid contract flow for Abrams from Pentagon and other U.S. allies.

The company won a $4.62 billion worth contract for manufacturing Abrams M1A2 SEPv3 tanks last year. The latest contract win is yet another bright example of the solid demand that this tank enjoys.

Growth Prospects

Per a report by Mordor Intelligence, the MBT market is expected to register a CAGR of more than 3% during 2020-2025, which bodes well for manufacturers of such battle tanks like General Dynamics and BAE Systems Plc BAESY.

BAE Systems’ Land business unit designs, manufactures, upgrades and supports combat vehicles. The company’s significant ground vehicles include Armored Multi-Purpose Vehicle (AMPV), CV90, CV90 MkiV, CV90120, CV90 IFV, CV90 Armadillo, ADAPTIV and a few more.

BAE Systems boasts a solid long-term earnings growth rate of 3.6%. The stock has gained 7.5% in the past year.

Price Performance

Shares of General Dynamics have gained 33.7% in a year against the industry’s decline 32.9%.

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Zacks Rank & Key Picks

General Dynamics currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the same sector are Aerojet Rocketdyne AJRD and Elbit Systems ESLT, both of which hold a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Aerojet Rocketdyne delivered an earnings surprise of 23.40% in the last-reported quarter. The Zacks Consensus Estimate for its current-year earnings has improved 3.6% over the past 60 days.

Aerojet Rocketdyne’s third-quarter 2021 sales increased 3.3% year over year. AJRD has gained 140.3% in the past five years.

Elbit Systems delivered an earnings surprise of 25.95% in the last-reported quarter. The Zacks Consensus Estimate for its current-year earnings has improved 10% over the past 60 days.

Elbit’s third-quarter 2021 revenues increased 22.6% year over year. ESLT has gained 53.8% in the past five years.


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