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General Dynamics' (GD) Arm Wins Deal to Support DDG 51 Ships

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General Dynamics Corp.’s (GD - Free Report) business unit, Bath Iron Works (BIW), recently secured a $55.1-million modification contract to provide lead yard services for the DDG 51 Arleigh Burke-class guided missile destroyers. The contract was awarded by the Naval Sea Systems Command, Washington, D.C.

Work related to the deal will be primarily performed in Bath, ME, and is scheduled to be completed by June 2022.

Growing Importance of DDG 51 Ships

The DDG 51 ships have gained widespread importance within the U.S. Naval forces, particularly because these warships are equipped with Lockheed Martin’s (LMT - Free Report) Aegis Weapon System, a highly integrated naval weapon system. These missile destroyers also contain SH-60 helicopters along with advanced anti-aircraft and land-attack missiles.

With a growing demand for this warship, General Dynamics is witnessing a steady flow of contracts, as is evident from the latest contract win. Alongside General Dynamics, Huntington Ingalls (HII - Free Report) , the largest military shipbuilding manufacturer in the United States, manufactures the DDG 51 Arleigh Burke-Class destroyer ship for the U.S. Navy.

Notably, the DDG 51 Arleigh Burke-class missile destroyers’ importance continues to grow as these ships offer a wide range of advanced warfighting capabilities in multi-threat air, surface and subsurface environments. It also offers protection against a wide range of threats, including ballistic missiles.

Future Prospects

The global naval shipbuilding market is expected to grow by $14.36 billion during the 2020-2024 period, at a CAGR of 3%, as estimated by a Technavio report. Notably, other players in the same industry, such as Mitsubishi Heavy Industries, Ltd. (MHVYF - Free Report) , should also potentially benefit from the projected growth of the naval shipbuilding market.

Our View

General Dynamics has been serving the U.S. Navy by constructing and delivering next-generation combat ships for decades. Being the Navy's primary surface combatant, the DDG 51 destroyers enjoy solid demand in the United States.

Furthermore, recently in June, the first DDG 51 Flight III destroyer has been launched by Huntington Ingalls, which is expected to provide much-enhanced warfighting capabilities to the U.S. Navy. So, shortly, we may expect General Dynamics to design the upgraded version too, being the lead designer and builder of DDG 51.

Such prominent demand and favorable projections place General Dynamics at an advantageous position in the global shipbuilding market.

Price Performance & Zacks Rank

Shares of General Dynamics have gained 21.9% in a year compared with the industry’s growth of 10.1%.

Zacks Investment ResearchImage Source: Zacks Investment Research

It currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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