Defense behemoth General Dynamics Corp.‘s (GD - Analyst Report) National Steel and Shipbuilding Co. (NASSCO) business division secured a modification contract from the U.S. Navy. The deal aims at procuring additional long lead time material, engineering and non-production support for the Expeditionary Mobile Base 5 (ESB 5). The original contract was awarded in Jun 2016.
Notably, Expeditionary Mobile Base (ESB), formerly known as the Mobile Landing Platform (MLP) or Afloat Forward Staging Base (AFSB), is a highly flexible ship that offers logistics movement from sea to shore, supporting a broad range of military operations.
Details of the Deal
Valued at $106.2 million, the contract was awarded by the Naval Sea Systems Command, Washington, D.C. The majority of the work related to this deal will be executed in Crozet, VA; San Diego, CA; Iron Mountain, MI and many other locations across the U.S. The deal will utilize fiscal 2016 and conversion (Navy) funds, while the work is expected to be over by Mar 2017.
Per the terms of the agreement, NASSCO will procure whole ship sets including interior outfittings; steel plates; hull and piping, ventilation and machinery insulation; heating, ventilation and air conditioning; emergency switchboards; piping; valves; steel shapes; ballast water treatment system; Aqueous Film Forming Foam system; and knuckle-boom crane.
ESB & NASSCO
ESB ships operate as mobile sea bases, providing the Navy Fleet with a critical access infrastructure that supports the flexible deployment of forces and supplies, whenever necessary. Interestingly, the commercial designing of ESB class of ships are based on the Alaska class crude oil carrier, also built by General Dynamics’ NASSCO.
In Jun 2015, General Dynamics delivered the Navy’s first Expeditionary Mobile Base – USNS Lewis B. Puller (ESB 3) – as part of the original MLP program. ESB 3 can accommodate 250 personel and has been designed to support MH-53 and MH-60 helicopters. NASSCO is currently constructing the second ESB, i.e. ESB 4 and is under contract to build a third, i.e. ESB 5. Construction for ESB 5 – the latest model in this fleet of ships – will be complete by 2017.
Currently, the ESB constitutes the centerpiece of the U.S. Navy’s forward-deployed airborne mine countermeasures mission (AMCM). It aims at facilitating the operations and maintenance of airborne mine countermeasures detachment personnel and equipment.
Being one of the only two contractors in the world equipped to build nuclear-powered submarines, General Dynamics already enjoys a dominant position over its peers in the U.S. Navy. Added to that, its sole privilege to win contracts related to the U.S. government’s AMCM further boosts its business in the shipbuilding and marine systems space. Going forward, management has raised the company’s 2016 outlook for its Marine business segment by $100-$200 million, to which we believe the recent modification contract will contribute noticeably.
Zacks Rank & Other Stocks to Consider
General Dynamics currently carries a Zacks Rank # 2 (Buy). A few better-ranked stocks in the aerospace and defense sector include Engility Holdings, Inc. (EGL - Snapshot Report) , AAR Corp. and Leidos Holdings, Inc. (LDOS - Snapshot Report) .
Engility sports a Zacks Rank #1 (Strong Buy) and has witnessed a 3.29% rise in its last 1 month’s stock price. This company’s current year consensus estimate improved 12.7% in last 60 days.
AAR Corp sports a Zacks Rank #1 and has witnessed a 8.37% surge in its last 1 month’s stock price. This company’s current year consensus estimate improved 5% in last 30 days.
Leidos sports a Zacks Rank #1 and has witnessed a 1.52% rise in its last 1 month’s stock price. Over the trailing 4 quarters, this company witnessed a positive earnings surprise of 7.93% on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
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