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General Dynamics (GD) Wins Deal for Virginia-Class Submarines
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General Dynamics Corporation’s (GD - Free Report) business unit, Electric Boat, recently clinched a $517.2 million contract to provide unique parts and specialized material for Virginia-class submarines. The contract has been awarded by the Naval Sea Systems Command, Washington, D.C.
Majority of the work related to this contract will be executed in Groton, CT. The contract is expected to get completed by September 2028.
What’s Favoring General Dynamics?
Changes in military dynamics have led to increasing defense spending as a well-funded military can deter sudden assault by other nations. This has led to increasing spending on submarines in order to improvise and upgrade sea warfare capabilities. Looking ahead, per a report from the Mordor Intelligence firm, the submarine market is projected to witness a CAGR of 4% during 2023-2028.
In this context, it is imperative to mention that General Dynamics’ Electric Boat unit is the prime contractor and lead shipyard on all Navy nuclear-powered submarine programs. Electric Boat is responsible for all aspects of design and engineering and leads the construction of both Virginia-class attack submarines and Columbia class ballistic-missile submarines.
The Navy procures Virginia-class submarines in multi-boat blocks at a two-per-year rate. The company is currently working on Blocks IV and V in the program, with 17 Virginia-class submarines in its backlog scheduled for delivery through 2032.
Notably, nine of the boats in Block V include the Virginia Payload Module, an 84-foot Electric Boat-designed-and-built hull section, which adds four additional payload tubes, more than tripling the strike capacity of these submarines and providing unique capabilities to support special missions.
Such expertise in manufacturing submarines, which excel in providing unique capabilities to support special missions, must have led to a steady order inflow of submarines for General Dynamics like the latest one, thus boosting its revenue generation prospects.
Peer Moves
Defence majors that are likely to gain from the expanding submarine market are BAE Systems(BAESY - Free Report) , Northrop Grumman(NOC - Free Report) and Huntington Ingalls Industries (HII - Free Report) .
BAE Systems’ Astute class submarines, the U.K.’s largest and most powerful attack submarines, can strike targets up to 621 miles from the coast with pinpoint accuracy.
BAE Systems boasts a long-term earnings growth rate of 14%. Shares of BAESY have returned 51.4% in the past year.
Northrop Grumman designs, develops and produces communication systems, sensors, signal processing and electronic warfare systems to counter increasingly sophisticated sea-based threats. It also provides launch systems for submarines. NOC’s eject launch technology has powered more than 7,000 successful launches.
Northrop’s long-term earnings growth rate is pegged at 4.1%. The Zacks Consensus Estimate of NOC’s 2023 sales implies growth rate of 5.6% from the prior-year reported figure.
Huntington Ingalls is a co-developer with Electric Boat to build Virginia-class fast-attack nuclear submarines. Its Newport News division is participating in the design and construction of the Columbia-class (SSBN 826) submarine as a replacement for the current aging Ohio-class nuclear ballistic missile submarines.
The Zacks Consensus Estimate of HII’s 2023 sales calls for growth rate of 3.5% from the prior-year reported figure. In the past six months period, HII shares have increased 4% in the past three months.
Price Performance
Shares of General Dynamics have increased 3.1% in the past three months against the industry’s 10.6% decline.
Image: Bigstock
General Dynamics (GD) Wins Deal for Virginia-Class Submarines
General Dynamics Corporation’s (GD - Free Report) business unit, Electric Boat, recently clinched a $517.2 million contract to provide unique parts and specialized material for Virginia-class submarines. The contract has been awarded by the Naval Sea Systems Command, Washington, D.C.
Majority of the work related to this contract will be executed in Groton, CT. The contract is expected to get completed by September 2028.
What’s Favoring General Dynamics?
Changes in military dynamics have led to increasing defense spending as a well-funded military can deter sudden assault by other nations. This has led to increasing spending on submarines in order to improvise and upgrade sea warfare capabilities. Looking ahead, per a report from the Mordor Intelligence firm, the submarine market is projected to witness a CAGR of 4% during 2023-2028.
In this context, it is imperative to mention that General Dynamics’ Electric Boat unit is the prime contractor and lead shipyard on all Navy nuclear-powered submarine programs. Electric Boat is responsible for all aspects of design and engineering and leads the construction of both Virginia-class attack submarines and Columbia class ballistic-missile submarines.
The Navy procures Virginia-class submarines in multi-boat blocks at a two-per-year rate. The company is currently working on Blocks IV and V in the program, with 17 Virginia-class submarines in its backlog scheduled for delivery through 2032.
Notably, nine of the boats in Block V include the Virginia Payload Module, an 84-foot Electric Boat-designed-and-built hull section, which adds four additional payload tubes, more than tripling the strike capacity of these submarines and providing unique capabilities to support special missions.
Such expertise in manufacturing submarines, which excel in providing unique capabilities to support special missions, must have led to a steady order inflow of submarines for General Dynamics like the latest one, thus boosting its revenue generation prospects.
Peer Moves
Defence majors that are likely to gain from the expanding submarine market are BAE Systems(BAESY - Free Report) , Northrop Grumman(NOC - Free Report) and Huntington Ingalls Industries (HII - Free Report) .
BAE Systems’ Astute class submarines, the U.K.’s largest and most powerful attack submarines, can strike targets up to 621 miles from the coast with pinpoint accuracy.
BAE Systems boasts a long-term earnings growth rate of 14%. Shares of BAESY have returned 51.4% in the past year.
Northrop Grumman designs, develops and produces communication systems, sensors, signal processing and electronic warfare systems to counter increasingly sophisticated sea-based threats. It also provides launch systems for submarines. NOC’s eject launch technology has powered more than 7,000 successful launches.
Northrop’s long-term earnings growth rate is pegged at 4.1%. The Zacks Consensus Estimate of NOC’s 2023 sales implies growth rate of 5.6% from the prior-year reported figure.
Huntington Ingalls is a co-developer with Electric Boat to build Virginia-class fast-attack nuclear submarines. Its Newport News division is participating in the design and construction of the Columbia-class (SSBN 826) submarine as a replacement for the current aging Ohio-class nuclear ballistic missile submarines.
The Zacks Consensus Estimate of HII’s 2023 sales calls for growth rate of 3.5% from the prior-year reported figure. In the past six months period, HII shares have increased 4% in the past three months.
Price Performance
Shares of General Dynamics have increased 3.1% in the past three months against the industry’s 10.6% decline.
Image Source: Zacks Investment Research
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.