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General Dynamics' (GD) Unit Wins $60M Deal From U.S. Army

Zacks Equity Research
Updated

General Dynamics Corp.’s GD business division, Ordnance and Tactical Systems secured a contract worth $59.9 million for 30mm x 173mm armor piercing, fin stabilized, discarding sabot with tracer cartridges.

The deal has been awarded by the Army Contracting Command, NJ. Work related to it is scheduled to be completed by May 31, 2021.

Defense Scenario Driving Orders

With the meteoric rise of the Islamic State of Iraq and Syria (ISIS) over the past few years along with more developing nations increasing their share of defense spending, global market for defense equipment has been on growth trajectory. This, in turn, has provided a solid impetus to sales in the U.S. Aerospace-Defense industry with the nation being the largest weapon supplier. Again, the growing cross-border tension due to North Korea’s continuous nuclear tests along with radical terrorism has boosted the defense sector in the recent times.

Furthermore, the recent budgetary amendments in the country have favored defense giants like General Dynamics, The Boeing Company BA, Raytheon Co. RTN and Lockheed Martin Corporation LMT, among others. These factors are expected to rake in more orders for these companies in the days to follow.

In September 2017, the U.S. Senate passed fiscal 2018 defense policy bill worth $700 billion. The bill includes $6 billion to boost Navy shipbuilding. Therefore, this bill is expected to drive revenue growth for General Dynamics, one of the prime shipbuilders in the United States.

Our Take

General Dynamics’ Ordnance and Tactical Systems is the leading commercial disposer of explosive materials and devices in the United States. It is also one of the leading manufacturers of mortar weapons and systems, bomb bodies and propellants.

Notably, this business unit of General Dynamics has been producing 30mm ammunition for over 40 years. The 30mm x 173mm family includes armor-piercing, anti-personnel, airburst and low cost training ammunition that offer enhanced accuracy, penetration and lethality necessary to defeat a spectrum of threats on the battlefield.

This units valued expertise in design, development and manufacturing of cartridges, included in the latest contract, establishes General Dynamics as a globally recognized supplier of high quality ammunition.

Consequently, strong demand for such ammunitions has been boosting the company’s revenue growth. Evidently, during the third quarter of 2017, the Combat Systems segment, which constitutes Ordnance and Tactical Systems unit, generated 13% revenue growth year over year. Going forward, we can expect consistent growth in the segment's top line driven by strong demand for its products and frequent contract wins.

Price Movement

Shares of General Dynamics have rallied 14.8% in a year compared with the broader industry’s gain of 34.3%. The underperformance might have been caused by the company’s declining backlogs in recent times.


 

Zacks Rank

General Dynamics carries 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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Boeing Company (The) (BA) : Free Stock Analysis Report
 
General Dynamics Corporation (GD) : Free Stock Analysis Report
 
Lockheed Martin Corporation (LMT) : Free Stock Analysis Report
 
Raytheon Company (RTN) : Free Stock Analysis Report
 
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