General Dynamics (GD) Wins a $922M Deal to Modernize CENTCOM

General Dynamics Corp.’s GD business unit, General Dynamics Information Technology (“GDIT”), recently revealed that it secured a contract worth $922 million for upgrading the U.S. Central Command's (“CENTCOM”) enterprise IT infrastructure in February 2024. The contract has been awarded by the General Services Administration.

About the Contract

Per the terms of the contract, GDIT will manage enterprise data using artificial intelligence and machine learning techniques to improve decision-making and move CENTCOM to a new cloud environment, along with improving the efficiency of its networks. To this end, GDIT aims at utilizing its zero-trust capabilities to strengthen CENTCOM's cyber defenses and protect against future cyber threats.

Growth Prospects

Amid growing geopolitical tensions worldwide, cyber security threats have been posing as a major risk factor to a nation’s security. As nations are rapidly expanding their investment in defense products, the availability of a safe, reliable and efficient IT network to connect the operational base and fighters on the ground has emerged as the need of the hour.

The Defense IT Spending market’s prospects remain robust, driven by factors like growing demand for autonomous defense systems like unmanned aircraft, the increased adoption of artificial intelligence and machine learning in improving situational awareness as well as enhanced demand for war simulations. To this end, per a report by Technavio, the Defense IT Spending market is projected to witness a CAGR of 4.5% during the 2023-2028 period.

GDIT delivers dynamic and proactive cybersecurity services as threat actors adopt new tactics and techniques. It supports some of the most complex programs within Special Operations Forces by designing and implementing robust IT systems that meet the high-pressure requirements of the cyber battlefield.

Such capabilities of GDIT reflect the critical role that it plays in the defense IT spending market and thus can be expected to benefit from this market’s growth projection in the form of solid order flows. The latest contract win is a further testament to that.

Peer Prospects

Apart from General Dynamics, other defense contractors that are expected to enjoy the perks of the growing defense IT spending market are as follows:   

Northrop Grumman NOC: Its Defense Systems provides innovative mission-critical solutions in aircraft sustainment and modernization, training and simulation, integrated battle command systems and advanced weapons, along with software development and IT modernization and sustainment.

Northrop has a long-term (three to five years) earnings growth rate of 10.1%. The Zacks Consensus Estimate for NOC’s 2024 sales suggests growth of 4.6% from the prior-year reported figure.

Lockheed Martin LMT: It remains a leading provider of defense technology in comprehensive cyber systems for its defense and global security customers. LMT’s MR2 platform is helping the U.S. military digitally transform with real-time reports on employee training and readiness.

Lockheed has a long-term earnings growth rate of 4.2%. The Zacks Consensus Estimate for LMT’s 2024 sales implies growth of 2.7% from the prior-year reported figure.

BAE Systems BAESY: It is the United Kingdom’s leading Cyber and Electromagnetic Activities integrator and provider of high-threat cyber and specialist wireless solutions. BAESY’s Cyber Portfolio includes products and services spanning risk advisory and governance, security testing, incident response, designing and building national-level cyber defense capability and the security management of enterprise networks.

BAESY has a long-term earnings growth rate of 12.9%. The Zacks Consensus Estimate for BAESY’s 2024 sales implies growth of 34.1% from the prior-year reported figure.

Price Movement

In the past three months, shares of General Dynamics have increased 13.4% against the industry’s decline of 2.9%.

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Zacks Rank

General Dynamics currently 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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