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General Dynamics (GD) Unit Wins $120M U.S. Navy Contract


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General Dynamics Corporation’s (GD - Analyst Report) business unit, General Dynamics Electric Boat Corp., has won a contract from U.S. Navy, worth $176.2 million. The contract was awarded by the Supervisor of Shipbuilding Conversion and Repair, Groton, CN.

Contract Details

Per the contract, Electric Boat will perform maintenance, repair, modifications, testing and usual work onboard USS Montpelier at the time of its planned interim dry docking.

Work is scheduled to be complete by Mar 2018 and will be performed in Groton. It will use fiscal 2017 operations and maintenance (Navy) funds.

What’s USS Montpelier?

USS Montpelier is a Los Angeles-class attack submarine. It is build by Newport News Shipbuilding, a unit of Huntington Ingalls Industries, Inc. (HII - Analyst Report) and Dry Dock Company. The submarine, which is 360-feet long, can travel at speeds in excess of 25 knots.

Fast-attack submarines like Montpelier are given versatile missions. They apply their stealth, persistence, agility and weapons to execute special force operations, destroy opponents’ military and economic operations at sea, offer early strike from short distances, and ensure underwater dominance.

To keep the submarines ready for mission, repairs and upgradation of the existing systems is imperative. The contracts awarded to Electric Boat will help to keep the submarines ready for action.

Why Electric Boat?

Electric Boat is a nuclear-capable shipyard that possesses the skill, knowledge and experience to execute submarine repair efforts for in-service nuclear-powered submarines, special mission submersibles, moored training ships and submarine support facilities. It is the leading provider of construction and maintenance services for the U.S. strategic nuclear missile-carrying and attack-submarine fleet.

Moreover, the Navy has announced its $100 billion Ohio replacement program, wherein Electric Boat, serving as the prime contractor, will be responsible for about 80% of the construction of new submarines. This contract will likely drive significant top-line growth by the end of the decade.

In September, Electric Boat secured two contracts from the Navy, worth a total $729.6 million. The first one is to continue rendering engineering and technical support for active nuclear submarines, while the other one includes repair work for in-service nuclear-powered submarines.

Zacks Rank & Key Picks

General Dynamics currently has a Zacks Rank #3 (Hold). A couple of other favorably placed stocks in the aerospace and defense space are Engility Holdings, Inc. (EGL - Snapshot Report) and AAR Corp. (AIR - Analyst Report) .

Engility has witnessed an 18.9% rise in its stock price in the last three months. On an average, the company has delivered a positive earnings surprise of 12.09% in the trailing four quarters. Engility sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AAR Corp. also sports a Zacks Rank #1 and the company has witnessed a 14.6% upside in its stock price over the past one month. This company’s 2016 earnings estimates improved 5% in the last 30 days.

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