General Dynamics Corporation’s (GD Quick QuoteGD - Free Report) business unit, General Dynamics Mission Systems Inc., recently clinched a contract to support the Littoral Combat Ship (LCS) System. The award has been offered by the Naval Surface Warfare Center, Port Hueneme Division.

Valued at $33.7 million, the contract is expected to be completed by March 2025. Per the terms of the deal, General Dynamics will provide design agent and lifecycle sustainment services to support the Independence Variant LCS System. 

 

Majority of the work related to the contract will be carried out in Pittsfield, MA.

Nations across the globe are fortifying their defense spending on military weapons and arsenals as they look to strengthen their defense capabilities. This also includes augmented spending on navy combat vehicles for enhanced sea warfare capabilities. Therefore, demand for combat ships, including LCS, is on the rise. Notably, the LCS plays a critical role in defending a nation, with these being designed to be agile, mission-focused platforms capable of operating in near-shore and open-ocean environments.

 

As investments in sea warfare capabilities for both defense and offensive purposes have been significantly gaining traction in recent times, the growth prospects for the naval combat system market remain solid. In this regard, according to a report by the Research and Markets firm, the global naval combat system market is projected to witness a CAGR of 8.8% during the 2024-2030 period. 

 

This is likely to benefit General Dynamics, considering its multi-domain maritime capabilities that enable current and future maritime missions. Notably, the core mission system of the U.S. Navy's Independence-variant LCS is built on General Dynamics' computing infrastructure. Notably, GD’s computing technology controls everything from driving the ship to firing its guns. It is designed to maximize automation, enabling sailors to focus on their missions.

 

The company is the lead integrator for the Independence-variant LCS systems, responsible for the design, integration and testing of the navigation, command, control, computing and aviation systems on each ship.

 

Considering the naval combat system market’s growth prospects and General Dynamics’ expertise in providing support services for LCS, the company may witness a significant order flow, like the latest one. This will continue to boost its revenue generation prospects.

Considering the solid growth opportunities offered by the global naval combat system market, other defense primes like Huntington Ingalls Industries (HII Quick QuoteHII - Free Report) , Northrop Grumman (NOC Quick QuoteNOC - Free Report) and Lockheed Martin (LMT Quick QuoteLMT - Free Report) , with a strong presence in this segment, should also benefit.

Huntington Ingalls’  Ingalls Shipbuilding and Newport News Shipbuilding segments design and construct non-nuclear ships, including amphibious assault ships, expeditionary warfare ships, surface combatants and national security cutters. During 2023, 81% of the company’s revenues were generated from the U.S. Navy.

HII boasts a long-term (three-to-five-years) earnings growth rate of 6.5%. The Zacks Consensus Estimate for 2024 sales implies growth of 2% from the prior-year figure.

Northrop Grumman’s delivers components like Airborne LASER Mine Detection System, Surface Electronic Warfare Improvement Program Block III, Fire Scout and bridge and navigation systems for both the Freedom and Independence variants of LCS. During 2023, 15% of NOC’s sales belonged to the Navy.

NOC boasts a long-term earnings growth rate of 10.1%. The Zacks Consensus Estimate for 2024 sales implies growth of 4.6% from the prior-year figure.

Lockheed Martin’s Rotary and Mission Systems (RMS) designs, manufactures, services and supports various surface ships. It is engaged in the construction of Freedom-variant LCS, which is a resilient and flexible warship. The AEGIS Combat System is the U.S. Navy’s most modern surface combat system. RMS ended 2023 with a backlog of $37.73 billion.

LMT boasts a long-term earnings growth rate of 4.2%. The Zacks Consensus Estimate for 2024 sales implies growth of 2.7% from the prior-year figure.

In the past year, shares of GD have rallied 27.4% against the industry’s 8.2% decline.

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