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General Dynamics Wins $2.5B Stryker Vehicles Production Deal

Zacks Equity Research

General Dynamics Corporation’s GD business unit, Land Systems, recently secured a $2.48-billion contract for the production of Stryker Double V-Hull A1 engineering vehicles along with an engineering change proposal configuration. The contract was awarded by the U.S. Army Contracting Command, Detroit Arsenal, MI. Work related to the deal is expected to get completed by Apr 30, 2027.

A Brief Note on Stryker Double V-Hull A1 Vehicles

General Dynamics’ eight-wheeled, armored combat vehicle is powered by a 350-horsepower Caterpillar JP-8 diesel engine that provides the U.S. Army with an effective mix of capabilities, including infantry transport, offensive firepower and reconnaissance. The Stryker's other capabilities include the anti-tank guided missiles, mobile C4ISR, engineering and fire support, mobile gun system, and medical evacuation. The vehicle’s newly launched double-V hull design leads to staggering improvements in soldier survivability, providing protection in open terrain areas.

Our View

With widespread geopolitical tensions around the globe, most nations are strengthening their arsenals and taking initiatives to upgrade land-combat military vehicles. Such initiatives taken on a global scale should boost General Dynamics’ growth as it is one of the major players in the wheeled military vehicle market.

Notably, the fiscal 2021 defense budget proposal provisions for a spending plan of $13 billion on Ground Systems. Such a stupendous budgetary proposal, if approved, indicates solid growth prospects for the company in the days ahead, in relation to wheeled combat and armored vehicles. The latest contract win is one such example.

Furthermore, per a report by the Markets and Markets research firm, the Global Armored Vehicles Market is projected to grow from $14.3 billion in 2018 to $16.8 billion by 2023, at a CAGR of 3.25%. Such growth can be attributed to the rising incidences of armed conflicts among nations, sporadic spread of terrorism and increasing defense budgets, particularly in Asia-Pacific and the Middle East.

Thanks to the presence of combat-proven military vehicles in its portfolio, General Dynamics can be projected to significantly gain in this expanding market. Additionally, such favorable trends should also benefit other wheeled combat and armored vehicle makers like Lockheed Martin LMT and Northrop Grumman NOC.

Price Movement

General Dynamics’ share price slipped 13.6% in the past year compared with the industry’s decline of 24.6%.



Zacks Rank & A Key Pick

General Dynamics currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the same sector is CAE Inc. CAE, which holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CAE delivered a positive earnings surprise of 3.48%, on average, in the trailing four quarters. The company has a long-term earnings growth rate of 8%.

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