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GD Gets $49.4M Order for DDG 51

NOC GD LMT

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Bath Iron Works (“BIW”), a business wing of General Dynamics Corporation (GD - Analyst Report), has received two contracts worth $49.4 million from the U.S Navy under the DDG 51 Arleigh Burke-class guided missile destroyer program.

Per the first contract, General Dynamics will be responsible for providing lead yard services to the DDG 51 program.  The contract, worth $28.3 million, is a modification pact that follows a contract initially received by the company earlier in 2012.

The second contract, worth $21.1 million, under the DDG 51 program was for post-shakedown availability (“PSA”) for USS Michael Murphy (DDG 112). The total value of the contract is $27.1 million, if all the options are exercised. Though BIW will remain the prime contractor, Bath Iron Works has teamed up with BAE Systems, a subsidiary of BAE Systems plc (BAESY), for this contract. The task is expected to be completed by August 2013.

DDG 51 Arleigh Burke-class features Aegis combat system, the vertical launching system, advanced anti-submarine warfare system, two embarked SH-60 helicopters, advanced anti-aircraft missiles and Tomahawk anti-ship and land-attack missiles. This makes it the most powerful surface combatant positioned in sea. DDG 51 multi-mission guided missile destroyers provide a complete array of anti-submarine, anti-air and anti-surface capabilities by operating in support of carrier battle groups, surface action groups, amphibious groups and replenishment groups.

Bath Iron Works is the lead shipyard and design agent for the DDG 51 Arleigh Burke-class. It has been providing design and technical assistance for design upgrades and major changes to the two shipyards that are currently building DDG 51-class destroyers since 1987. Under the Navy's DDG 51 continuation program, BIW is working on the construction of Rafael Peralta (DDG 115) and Thomas Hudner (DDG 116). It had received a contract modification worth $663 million for the construction of DDG 116 in February 2012.

This contract proves the company’s capability of providing high quality support and services anytime for the fleet of DDG 51-class of ships.

Based 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.

General Dynamics’ revenue exposure is spread over a broad portfolio of products and services in business aviation; combat vehicles, weapons systems and munitions; shipbuilding design, repair and construction; and information systems, technologies and services. Diversification of revenue through exposure to a number of uncorrelated markets will keep the overall growth momentum steady. However, with possibility of a cut in the defense budget, the company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.

Some of its major peers are Northrop Grumman Corporation (NOC - Analyst Report) and Lockheed Martin Corporation (LMT - Analyst Report).

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