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BAE Systems (BAESY) Wins a $278M Deal for Combat Vehicle

·3 min read

BAE Systems Plc BAESY recently clinched a contract for manufacturing the Cold Weather All-Terrain Vehicle. The U.S. Army Contracting Command, Detroit Arsenal, MI has offered the award.

Valued at $278.2 million, this contract is expected to get completed by Aug 19, 2029. Per the terms of the deal, BAE Systems will provide production units, spare parts and contractor logistics support for the Cold Weather All-Terrain Vehicle.

What’s Favoring BAE Systems?

BAE Systems designs, manufactures and upgrades tracked and amphibious combat vehicles. Its position is supported by strong positions on a number of franchise U.S. defense programs, including Armored Multi-Purpose Vehicle and Amphibious Combat Vehicle.

In 2021, the company was selected along with a competitor to participate in trials for the U.S. Army’s Cold Weather All-Terrain Vehicle program.  The latest contract win, mentioned above, reflects that BAE Systems successfully beat its competitor in winning the bid for the Cold Weather All-Terrain Vehicle.

Last year, the U.S. Army revealed its Arctic strategy, named “Regaining Arctic Dominance,” which reflected the increased focus of the U.S. military on ramping up its strength in the Arctic region. Considering this, we may expect BAE Systems to win more such contracts involving the Cold Weather All-Terrain Vehicle, which in turn should significantly boost its future revenues, with combat vehicles constituting 52% of BAESY’s total sales, as of 2021.

Growth Prospects

The global armored vehicle market’s size is likely to witness a CAGR of 6.9% over the 2022-2030 period, per a report from the Grand View Research firm. The expanding size of this market will not only benefit BAE Systems but also defense majors like Northrop Grumman NOC, Raytheon Technologies RTX and General Dynamics GD, which enjoy a prime position in the combat vehicle space.

Northrop Grumman specializes in innovating low-cost, highly reliable, precise weapons and ammunition for artillery and mortar systems, medium-caliber weapon platforms, and battle tanks. It is also a pioneer in hardened electronics technologies used in weapon applications and produces precision guidance kits that employ a common technology base to transform conventional artillery and mortar munitions into precise, Global Positioning System (GPS)-guided weapons.

Northrop Grumman has a long-term earnings growth rate of 2.2%. The Zacks Consensus Estimate for NOC’s 2022 sales implies an improvement of 2% from the 2021 reported figure.

Raytheon is currently teaming up with American Rheinmetall Vehicles to meet the U.S. Army’s current requirement of a true, next-generation Optionally Manned Fighting Vehicle, namely the Lynx Infantry Fighting Vehicle. The Lynx Infantry Fighting Vehicle is a next-generation, tracked and armored fighting vehicle designed to address the critical challenges of future battlefields.

Raytheon’s long-term earnings growth rate is pegged at 10.4%. The Zacks Consensus Estimate for RTX’s 2022 sales indicates an improvement of 4.9% from the 2021 reported figure.

General Dynamics’ Land Systems business unit delivers powerful military vehicles, including the Abrams tank, Stryker combat vehicles, LAVs and AJAX armored fighting vehicles.

The long-term earnings growth rate of GD is pegged at 10.2%. The Zacks Consensus Estimate for GD’s 2022 sales indicates a surge of 2.6% from the prior-year reported figure.

Price Movement

In the past year, shares of BAE Systems have rallied 22% compared with the industry’s growth of 5.6%.

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Zacks Rank

BAE Systems currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

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Northrop Grumman Corporation (NOC) : Free Stock Analysis Report
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