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General Dynamics Wins $46M Deal to Offer Submarine Support
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Defense behemoth General Dynamics Corp.’s (GD - Free Report) Electric Boat business unit clinched a modification contract to support and operate the Nuclear Regional Maintenance Department at the New England Submarine Base, New London, CT. Work under this deal is expected to be over by Apr 2018.
Details of the Deal
Valued at $46.2 million, the contract was awarded by Naval Sea Systems Command, Washington, DC. Per the terms of the agreement, General Dynamics will provide nuclear-related maintenance and repair services to operational submarines in support of returning mission ready submarines to the fleet. Fiscal 2017 operations and maintenance (Navy) fund will be utilized to finance this deal.
The contract will require project management, technical analysis, engineering and planning, training, inspection, and nuclear services to accomplish intermediate-level maintenance, modernization, and repairs of nuclear submarines. These services also include maintaining and modernizing government-owned facilities and equipment, and providing off-hull support of submarine maintenance. Work will be carried out in Groton, CT.
Our View
We would like to remind investors that General Dynamics is one of the only two contractors in the world equipped to build nuclear-powered submarines. The company’s Marine Systems business segment, which manufactures nuclear submarines, has been a consistent contributor to the company’s growth trajectory for quite some time.
Notably, this segment witnessed 3% revenue growth in the fourth quarter of 2016. Going forward, 2016–2020 sales CAGR for this segment is expected to be 5%, with the strongest year-over-year growth in 2018. The expected earnings CAGR for the marine group for 2016–2020 is about 9%. This surely indicates significant improvement in this segment’s business performance.
Moreover, On Mar 16, 2017, Trump administration put forward a request for additional FY 2017 appropriations worth $30 billion. In addition, these appropriations support future investment capabilities worth $15.5 billion in the aerospace and defense industry; of which $5.8 billion has been allotted for Navy. This also reflects improved prospects for General Dynamics’ business growth.
Price Performance
Shares of General Dynamics gained 41% over the last 12 months, outperforming the Zacks categorized Aerospace–Defenseindustry’s gain of 24.1%. The outperformance might have been triggered by the company’s focus on research and development, diverse customer base and an attractive product mix will help maintain a steady growth momentum and drive results in the quarters ahead.
Zacks Rank
General Dynamics currently has a Zacks Rank #4 (Sell). A few better-ranked stocks in the same space include Huntington Ingalls Industries, Inc. (HII - Free Report) , Leidos Holdings, Inc. (LDOS - Free Report) and Lockheed Martin Corp. (LMT - Free Report) .
Leidos Holdings clocked positive earnings surprises in two of the past four quarters, the average surprise being 5.80%. The stock currently carries a Zacks Rank #2 (Buy).
Lockheed Martin clocked positive earnings surprises in all of the past four quarters, the average surprise being 12.41%. The stock currently carries a Zacks Rank #2.
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General Dynamics Wins $46M Deal to Offer Submarine Support
Defense behemoth General Dynamics Corp.’s (GD - Free Report) Electric Boat business unit clinched a modification contract to support and operate the Nuclear Regional Maintenance Department at the New England Submarine Base, New London, CT. Work under this deal is expected to be over by Apr 2018.
Details of the Deal
Valued at $46.2 million, the contract was awarded by Naval Sea Systems Command, Washington, DC. Per the terms of the agreement, General Dynamics will provide nuclear-related maintenance and repair services to operational submarines in support of returning mission ready submarines to the fleet. Fiscal 2017 operations and maintenance (Navy) fund will be utilized to finance this deal.
The contract will require project management, technical analysis, engineering and planning, training, inspection, and nuclear services to accomplish intermediate-level maintenance, modernization, and repairs of nuclear submarines. These services also include maintaining and modernizing government-owned facilities and equipment, and providing off-hull support of submarine maintenance. Work will be carried out in Groton, CT.
Our View
We would like to remind investors that General Dynamics is one of the only two contractors in the world equipped to build nuclear-powered submarines. The company’s Marine Systems business segment, which manufactures nuclear submarines, has been a consistent contributor to the company’s growth trajectory for quite some time.
Notably, this segment witnessed 3% revenue growth in the fourth quarter of 2016. Going forward, 2016–2020 sales CAGR for this segment is expected to be 5%, with the strongest year-over-year growth in 2018. The expected earnings CAGR for the marine group for 2016–2020 is about 9%. This surely indicates significant improvement in this segment’s business performance.
Moreover, On Mar 16, 2017, Trump administration put forward a request for additional FY 2017 appropriations worth $30 billion. In addition, these appropriations support future investment capabilities worth $15.5 billion in the aerospace and defense industry; of which $5.8 billion has been allotted for Navy. This also reflects improved prospects for General Dynamics’ business growth.
Price Performance
Shares of General Dynamics gained 41% over the last 12 months, outperforming the Zacks categorized Aerospace–Defenseindustry’s gain of 24.1%. The outperformance might have been triggered by the company’s focus on research and development, diverse customer base and an attractive product mix will help maintain a steady growth momentum and drive results in the quarters ahead.
Zacks Rank
General Dynamics currently has a Zacks Rank #4 (Sell). A few better-ranked stocks in the same space include Huntington Ingalls Industries, Inc. (HII - Free Report) , Leidos Holdings, Inc. (LDOS - Free Report) and Lockheed Martin Corp. (LMT - Free Report) .
Huntington Ingalls clocked positive earnings surprises in three of the past four quarters, the average surprise being 19.85%. The stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Leidos Holdings clocked positive earnings surprises in two of the past four quarters, the average surprise being 5.80%. The stock currently carries a Zacks Rank #2 (Buy).
Lockheed Martin clocked positive earnings surprises in all of the past four quarters, the average surprise being 12.41%. The stock currently carries a Zacks Rank #2.
Zacks’ Best Private Investment Ideas
While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public. Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Click here for Zacks' private trades >>