General Dynamics Wins $42 million Contract for MK82, MK83, MK84 Bomb Bodies

  • Date
  • Jan. 4, 2020
  • Author
  • Zacks Equity Research

General Dynamics Corp.’s GD Ordinance and Tactical Systems unit has clinched a contract worth $41.8 million for the procurement of MK82-1 Bomb Bodies, MK82-6 Bomb Bodies, MK83-4 Bomb Bodies and MK84-4 Bomb Bodies. The deal has been awarded by the U.S. Army Contracting Command, Rock Island Arsenal, IL. Work related to the contract is scheduled to be completed by Dec 31, 2022, and will be carried out in Garland, TX.

Increasing Demand for Munitions

Rising geopolitical tensions across the globe and persistent security threats from terrorist activities have prompted nations to strengthen their defense systems manifold. With rapid technological upgrades, expanding munitions arsenal has steadily emerged to play a pivotal role in a nation’s defense strategy.

To this end, it is imperative to mention that General Dynamics’ Ordnance and Tactical Systems unit manufactures steel forged Mk-80 Series Bomb Bodies, which come in various configurations and are provided to the U.S. Air Force and Navy. Given this defense prime’s proven expertise in manufacturing combat-proven ammunitions, the presence of these bombs in its product portfolio leads to several contract wins from Pentagon. The latest contract win is a bright example of that.

Notably, air-delivered munitions provide the ability to destroy ground and naval targets without risking a large number of military personnel, even when operating deep within enemy territory. Therefore, the variants of the MK 82 aircraft bomb are being used extensively throughout the world. It is one of the most common families of air-delivered munitions ever produced.

Looking Ahead

The fiscal 2020 defense budget reflects a solid spending provision of $5.1 billion for munitions. This should usher in more contracts for General Dynamics, going ahead, as it is a renowned munitions manufacturer in the United States. Moreover, the North America ammunitions market, valued at $6.3 billion in 2018, is expected to witness notable growth owing to steadily rising defense expenditure in the nation.

Considering these developments, the global ammunition market size, estimated at $19.4 billion in 2018, is expected to exhibit a CAGR of 4.3% from 2019 to 2025. General Dynamics, with its solid presence in both domestic and international markets, should significantly benefit from such growth.

Price Performance

In a year’s time, shares of General Dynamics have gained about 17.6% compared with the industry’s 29.2% growth.

Stocks to Consider

General Dynamics currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the same industry are L3Harris Technologies Inc. LHX, Leidos Holdings LDOS and Northrop Grumman Corp. NOC, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

L3Harris Technologies delivered average positive earnings surprise of 5.02% in the last four quarters. The Zacks Consensus Estimate for 2020 earnings has climbed 6.6% over the past 90 days. Leidos Holdings delivered average positive earnings surprise of 8.93% in the last four quarters. The Zacks Consensus Estimate for 2020 earnings has moved up 3.2% over the past 90 days.

Northrop Grumman delivered average positive earnings surprise of 11.48%

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