Back to top

Image: Bigstock

General Dynamics Secures $148M Deal to Repair USS Cowpens

Read MoreHide Full Article

General Dynamics Corp.’s (GD - Free Report) subsidiary, National Steel and Shipbuilding Co. (NASSCO), recently clinched a contract for performing maintenance, modernization and repairs works on USS Cowpens (CG 63). Work related to the deal will be executed in San Diego, CA.

Details of the Deal

Valued at $147.7 million, the contract was awarded by the Naval Sea Systems Command, Washington, D.C. The deal includes options, which if exercised will bring the cumulative value of this contract to $154.8 million.

Per the terms of the agreement, NASSCO will offer the facilities and human resources capable of completing, coordinating and integrating multiple areas of ship maintenance, repair and modernization for USS Cowpens.

The company will utilize fiscal 2018 operations and maintenance (Navy) as well as other procurement (Navy) fund to complete the task by December 2019.

A Brief Note on USS Cowpens

USS Cowpens is an advanced surface vessel that brings outstanding Anti-Air Warfare, Anti-Submarine Warfare, Surface Warfare, and Communications capabilities to the United States Pacific Fleet. It is manned by a highly trained and professional crew of approximately 325 Sailors.

What’s Favoring General Dynamics?

General Dynamics’ NASSCO unit conducts full-service maintenance and surface-ship repair operations in four primary locations within the Navy’s largest U.S. ports and at customer locations across the globe. Also, it designs and delivers the world’s first liquefied natural gas (LNG)-powered containerships, using green ship technology, to dramatically decrease emissions while increasing fuel efficiency.

From 2014 to 2017, NASSCO constructed and delivered eight LNG-conversion-ready product tankers for commercial customers. Thus, reflecting the subsidiary’s strong potential in generating revenues for General Dynamics. Considering this, the latest contract win indicates at the possibility of increased revenue recognition from NASSCO in the coming days.

Meanwhile, it is imperative to mention that on Aug 13, President Trump gave the final nod for the colossal fiscal 2019 National Defense Authorization Act (NDAA), which sanctions a spending allowance of $717 billion for United States’ national security. This recently approved bill authorizes $24.1 billion for shipbuilding to fully fund 13 new battle force ships and accelerate funding for several future ships. Moving ahead, this should add an impetus to the business of shipbuilders like General Dynamics.

Price Movement   

In a year’s time, shares of General Dynamics have lost 4.1% against the industry’s 18.3% growth. The underperformance may have been caused by the intense competition that the company faces in the aerospace-defense space.

Zacks Rank & Key Picks                                   

General Dynamics currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the same space include Lockheed Martin (LMT - Free Report) , Engility Holdings and Huntington Ingalls (HII - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Lockheed Martin surpassed the Zacks Consensus Estimate in three of the trailing four quarter, with an average beat of 9.10%. It has a long-term earnings growth rate of 7.30%.

Engility exceeded the Zacks Consensus Estimate in the trailing four quarter, with an average beat of 19%. It has a long-term earnings growth rate of 5%.

Huntington Ingalls outpaced the Zacks Consensus Estimate in the trailing four quarter, with an average beat of 9.48%. It has a long-term earnings growth rate of 15%.

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.

See Them Free>>

Published in