General Dynamics Corp.’s (GD - Free Report) business unit, Electric Boat Corp., secured a contract worth $7.7 million from the U.S. Navy's Supervisor of Shipbuilding, Conversion and Repair, Groton, CT.
Per the contract Electric Boat will be responsible for detail designing, prototype manufacturing and testing of the Columbia main thrust bearing/vibration reducer system for the Columbia-class submarine program, formerly known as the Ohio Replacement program. The work will be carried out at the company’s Groton, CT, facility and is expected to be completed by Jun 2021.
The U.S. Navy designed the Columbia-class submarine with the aim to replace its existing 14 Trident-armed Ohio-class ballistic missile submarines. Under the Navy’s Submarine Unified Build Strategy (SUBS), the Columbia-class submarines will be jointly constructed by General Dynamics’ Electric Boat and Huntington Ingalls Industries Inc.’s (HII - Free Report) Newport New division. Per the U.S. Navy’s request, General Dynamics continues to be the prime contractor for designing and building the Columbia-class boats.
Why General Dynamics?
As one of the two contractors in the world with the capacity to build nuclear-powered submarines, General Dynamics enjoys a dominant position as a Navy contractor.
The U.S. Navy has kept Columbia-class submarine program among top priority list. As a result, huge budget has been allotted to the program. General Dynamics being the prime navy contractor, is expected to win a major portion of contracts from the nuclear-powered submarine industry.
Defense Industry’s Scenario
Defense industry as a whole got a good boost when President Trump proposed a 10% hike in the 2018 Defense budget. Since then the industry has witnessed regular orders being awarded by different verticals of the U.S. defense.
Earlier this month, Military shipbuilder, Huntington Ingalls Industries, Inc.'s (HII - Free Report) unit, Newport News, has clinched a $9.7 million modification contract to support the advance planning of the refueling complex overhaul of USS George Washington (CVN73). Work for this deal will be over by Aug 2017. (Read more: Huntington Ingalls Wins Navy Deal for USS George Washington)
Other defense giants such as Lockheed Martin (LMT - Free Report) and Boeing (BA - Free Report) have also been on the receiving end of huge contracts from the U.S. military.
Shares of General Dynamics have rallied 42.7% in the last one year, outperforming the Zacks categorized Aerospace-Defense industry’s gain of 27.6%.
This could be because General Dynamics consistently maintains a strategic alliance with the U.S. Department of Defense, which allows it to enjoy a steady flow of contracts.
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.
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