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General Dynamics (GD) Wins Contract to Support DDG Ships
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General Dynamics Corp.’s (GD - Free Report) business unit, NASSCO, recently clinched a contract involving the USS Chung-Hoon (DDG 93) and USS James E. Williams (DDG 95) assault ships. The award has been offered by the Naval Sea Systems Command, Washington, D.C.
Details of the Deal
Valued at $15.6 million, the contract is expected to be completed by April 2024. Per the terms of the deal, General Dynamics will provide planning of the maintenance, modernization, and repair of USS Chung-Hoon and USS James E. Williams ships’ fiscal 2024 depot maintenance period availabilities.
A major portion of the work related to this deal will be carried out in Norfolk, VA. This contract includes options which, if exercised, would bring its cumulative value to $753 million and work for the same will continue through November 2030.
What’s Favoring General Dynamics?
The changing dynamics of the military landscape and the rising geopolitical tension make it mandatory for a country to continuously evolve and strengthen its defense structure. To this end, Navy ships form an integral part of any military mission and arm the same in its ship warfare affairs.
Among different types of assault ships, DDG are guided missile destroyer warships that offer multi-mission offensive and defensive capabilities. It is imperative to mention in this context that General Dynamics builds the Arleigh Burke-class (DDG-51) guided-missile destroyers, one of the most guided missile destroyers. The company also manages the modernization and lifecycle support for this class of warship.
Notably, its NASSCO unit conducts full-service maintenance and surface-ship repair operations in Navy fleet concentration areas. As a result, the company frequently secures contracts from Pentagon for providing maintenance and repair support for the U.S. Navy ships, like the latest one. Such contract wins, in turn, should further boost revenue growth for GD’s Marine Systems segment, which houses the NASSCO unit and registered 15.4% top-line growth in the last reported quarter.
Growth Prospects
With increased spending by nations for strengthening their sea warfare capabilities, the military shipbuilding market is expected to witness strong demand. Per Mordor Intelligence, the global shipbuilding market is likely to witness a CAGR of more than 4.8% over the 2023-2028 period. This should boost General Dynamics’ prospects as it remains one of the major contractors for military ship manufacturing.
A few other defense primes that can reap the benefits of the expanding shipbuilding market are BAE Systems (BAESY - Free Report) , Mitsubishi Heavy Industries (MHVYF - Free Report) and Huntington Ingalls (HII - Free Report) .
BAE Systems designs and manufactures naval ships and submarines as well as state-of-the-art combat systems and equipment. It also offers an array of associated services, including training solutions, maintenance and modernization programs, to support ships and equipment in service worldwide.
BAESY’s long-term earnings growth rate is 14%. The Zacks Consensus Estimate for its 2023 sales indicates an improvement of 33.6% from the 2022 reported figure.
Mitsubishi Heavy Industries manufactures naval surface ships and submarines. The company also provides after-sales service for destroyers and submarines.
The Zacks Consensus Estimate for Mitsubishi’s fiscal 2023 earnings indicates growth of 64.8% from the prior-year reported figure. Shares of MHVYF have returned 56% value to investors in the past year.
Huntington Ingalls’ business segment, Ingalls, has an in-depth experience in manufacturing amphibious assault and expeditionary ships for the U.S. Navy. Being the U.S. Navy's primary surface combatant, the Aegis-equipped Arleigh Burke class (DDG 51) destroyers enjoy solid demand.
HII’s long-term earnings growth rate is 6.6%. The consensus estimate for its 2023 sales indicates an improvement of 3.5% from the 2022 reported figure.
Price Performance
Shares of General Dynamics have lost 2.4% in the past year compared with the industry’s decline of 7.1%.
Image: Bigstock
General Dynamics (GD) Wins Contract to Support DDG Ships
General Dynamics Corp.’s (GD - Free Report) business unit, NASSCO, recently clinched a contract involving the USS Chung-Hoon (DDG 93) and USS James E. Williams (DDG 95) assault ships. The award has been offered by the Naval Sea Systems Command, Washington, D.C.
Details of the Deal
Valued at $15.6 million, the contract is expected to be completed by April 2024. Per the terms of the deal, General Dynamics will provide planning of the maintenance, modernization, and repair of USS Chung-Hoon and USS James E. Williams ships’ fiscal 2024 depot maintenance period availabilities.
A major portion of the work related to this deal will be carried out in Norfolk, VA. This contract includes options which, if exercised, would bring its cumulative value to $753 million and work for the same will continue through November 2030.
What’s Favoring General Dynamics?
The changing dynamics of the military landscape and the rising geopolitical tension make it mandatory for a country to continuously evolve and strengthen its defense structure. To this end, Navy ships form an integral part of any military mission and arm the same in its ship warfare affairs.
Among different types of assault ships, DDG are guided missile destroyer warships that offer multi-mission offensive and defensive capabilities. It is imperative to mention in this context that General Dynamics builds the Arleigh Burke-class (DDG-51) guided-missile destroyers, one of the most guided missile destroyers. The company also manages the modernization and lifecycle support for this class of warship.
Notably, its NASSCO unit conducts full-service maintenance and surface-ship repair operations in Navy fleet concentration areas. As a result, the company frequently secures contracts from Pentagon for providing maintenance and repair support for the U.S. Navy ships, like the latest one. Such contract wins, in turn, should further boost revenue growth for GD’s Marine Systems segment, which houses the NASSCO unit and registered 15.4% top-line growth in the last reported quarter.
Growth Prospects
With increased spending by nations for strengthening their sea warfare capabilities, the military shipbuilding market is expected to witness strong demand. Per Mordor Intelligence, the global shipbuilding market is likely to witness a CAGR of more than 4.8% over the 2023-2028 period. This should boost General Dynamics’ prospects as it remains one of the major contractors for military ship manufacturing.
A few other defense primes that can reap the benefits of the expanding shipbuilding market are BAE Systems (BAESY - Free Report) , Mitsubishi Heavy Industries (MHVYF - Free Report) and Huntington Ingalls (HII - Free Report) .
BAE Systems designs and manufactures naval ships and submarines as well as state-of-the-art combat systems and equipment. It also offers an array of associated services, including training solutions, maintenance and modernization programs, to support ships and equipment in service worldwide.
BAESY’s long-term earnings growth rate is 14%. The Zacks Consensus Estimate for its 2023 sales indicates an improvement of 33.6% from the 2022 reported figure.
Mitsubishi Heavy Industries manufactures naval surface ships and submarines. The company also provides after-sales service for destroyers and submarines.
The Zacks Consensus Estimate for Mitsubishi’s fiscal 2023 earnings indicates growth of 64.8% from the prior-year reported figure. Shares of MHVYF have returned 56% value to investors in the past year.
Huntington Ingalls’ business segment, Ingalls, has an in-depth experience in manufacturing amphibious assault and expeditionary ships for the U.S. Navy. Being the U.S. Navy's primary surface combatant, the Aegis-equipped Arleigh Burke class (DDG 51) destroyers enjoy solid demand.
HII’s long-term earnings growth rate is 6.6%. The consensus estimate for its 2023 sales indicates an improvement of 3.5% from the 2022 reported figure.
Price Performance
Shares of General Dynamics have lost 2.4% in the past year compared with the industry’s decline of 7.1%.
Image Source: Zacks Investment Research
Zacks Rank
General Dynamics currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.