Back to top

Analyst Blog

Zacks Equity Research

General Dynamics Gets Sub-Contract

BA GD LMT

 ZacksTrade Now

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

General Dynamics Electric Boat, a wholly owned subsidiary of General Dynamics Corporation (GD - Analyst Report), has been awarded a U.S. Navy contract worth $41 million to perform non-nuclear submarine modernization and maintenance work. The contract includes four annual options. If these options are exercised, the cumulative value of the contract would be $222.3 million.

Under the contract, Electric Boat will continue operating the New England Maintenance Manpower Initiative, providing a wide range of non-nuclear overhaul, repair and modernization services in support of submarines, floating dry docks, support and service craft and other equipment at the base. About 250 Electric Boat employees will be engaged in the work.

Headquartered in Falls Church, Virginia, General Dynamics engages in mission-critical information systems and technologies; land and expeditionary combat vehicles, armaments and munitions; shipbuilding and marine systems; and business aviation. The company operates through four segments: Information Systems & Technology (IS&T), Combat Systems, Marine Systems, and Aerospace.

General Dynamics was the third largest U.S. defense contractor in terms of revenue in fiscal 2011, after The Boeing Company (BA - Analyst Report) and Lockheed Martin Corporation (LMT - Analyst Report). The company is one of two contractors equipped to build nuclear-powered submarines in the U.S.

Looking forward, key growth drivers for General Dynamics include the improving business jet market, its stable business of U.S. military vehicles, a backlog (though declining) of $51.5 billion, an ongoing share repurchase program and strong cash flow generation. However, the company is largely tied to the U.S. defense budget, where the threat of budget cut is high. Also, we have turned slightly cautious about the company’s steadily dropping order backlog, and risks related to the execution of key projects.

General Dynamics’ total order backlog decreased to $51.5 billion at the end of the first nine months of 2012 from $59.6 billion at fiscal-end 2010. Going forward, the U.S. economic fundamentals are basically being kept on a leash as the Euro-crisis continues to cast its spell over the financial markets, keeping risks of further cutbacks in future defense budgets at a high level. Our apprehension is fueled by $15 trillion of national debt and an unemployment rate hovering around 7.9% which would lead to the Budget Control Act’s dictum of automatic cutbacks across the board going forward.

Going by the pulse of the economy and the pros and cons, we prefer to maintain our long-term Neutral recommendation on the stock. Moreover, General Dynamics holds a Zacks #3 Rank that translates into a short-term Hold rating.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
KNIGHTSBRIDG VLCCF 13.52 +7.81%
CLAYTON WILL CWEI 135.74 +3.98%
MOTORCAR PAR MPAA 29.00 +3.35%
CANADIAN SOL CSIQ 29.86 +2.23%
SHENANDOAH T SHEN 29.81 +1.98%