Back to top

Image: Bigstock

General Dynamics Wins $5B Contract for Nuclear Submarines

Read MoreHide Full Article

General Dynamics Corp.’s (GD - Free Report) subsidiary, Electric Boat Corp., has clinched a $5.1 billion special incentivescontract to complete design of the Integrated Product and Process Development for the Columbia-class ballistic missile submarines (SSBNs).The contract has been awarded by the Naval Sea Systems Command, Washington, D.C.

About the Contract

The contract covers development of component and technology, efforts related to missile tube module and reactor compartment bulkhead prototyping and manufacturing, and United Kingdom Strategic Weapon Support System kit manufacturing for the Columbia class ballistic missile submarines.

Notably, the deal has been was awarded to General Dynamics as its Electric Boat division currently owns the wholeworkforce of nuclear ballistic missile submarine design/engineering and data environment to support achievement of the highly specialized submarine design products and integration efforts required to meet all of the contemplated technical and schedule contract requirements.

Majority of the work will be performed at Groton, CT while the rest will be performed at Newport News and a few other places across the United States. It will be completed using 2017 shipbuilding and conversion (Navy), fiscal 2017 research, design, test and evaluation (Navy) and United Kingdomfundsby December 2031.

About Columbia-class Submarines

The Columbia-class submarine program, formerly known as the Ohio replacement submarine program, was designed by the U.S. Navy to replace its existing force of 14 Trident-armed Ohio-class ballistic missile submarines with a new class of 12 ballistic missile submarines (SSBNs). Originally built by Electric Corp., the Columbia-class submarines are operated by the United Kingdom, Russia, China, France and India.

Under the Navy’s Submarine Unified Build Strategy (SUBS), the Columbia-class submarines will be jointly constructed by General Dynamics’ Electric Boat and Huntington Ingalls Industries Inc.’s (HII - Free Report) Newport News division. Per the U.S. Navy’s request, General Dynamics continues to be the prime contractor for designing and building the Columbia-class boats.

Our View

General Dynamics enjoys a dominant position as a Navy contractor. This is because it is one of the only two contractors in the world equipped to build nuclear-powered submarines. The company is a prime contractor for the development of Virginia-class submarines (another class of nuclear-powered submarine).

Given the Navy’s recent acknowledgement of the Columbia-class program as its top priority and the huge budget allotted to the same, the modification contract will undoubtedly render the company a leading position in the nuclear-powered submarine industry.

Defense Scenario Helping Industry Giants

The growing cross-border tension due to North Korea’s continuous nuclear tests, along with radical terrorism has boosted the defense sector in the recent times. Also, the recent budgetary amendments in the country have favoured defense giants like General Dynamics, The Boeing Company (BA - Free Report) and Lockheed Martin Corporation (LMT - Free Report) , among others. These factors are expected to rake in more orders for these companies in the long run.

Recently, the U.S. Senate Armed Services Committee approved fiscal 2018 defense policy bill. The National Defense Authorization Act for fiscal 2018, worth $700 billion, includes $25 billion to boost Navy shipbuilding. Notably, the bill is expected to boost revenue growth for General Dynamics, which is one of the prime shipbuilders in the United States.

Price Movement

Shares of General Dynamics have rallied 32.9% in a year, underperforming the industry’s gain of 43.3%.



This may have been caused by the earlier budget cuts inflicted by the U.S. government in the defense space.

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.

5 Trades Could Profit "Big-League" from Trump Policies

If the stocks above spark your interest, wait until you look into companies primed to make substantial gains from Washington's changing course.

Today Zacks reveals 5 tickers that could benefit from new trends like streamlined drug approvals, tariffs, lower taxes, higher interest rates, and spending surges in defense and infrastructure.

See these buy recommendations now >>

Published in