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General Dynamics Wins $87M Maintenance Deal for Warfare Ships

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General Dynamics Corporation’s (GD - Free Report) business unit, Bath Iron Works (BIW), has recently won a contract from the U.S. Navy to provide integrated planning yard services for DDG-51 and FFG-7 class ships. Work related to the deal is scheduled to be over by February 2019.

Contract Details

The contract, worth $87.2 million, has been awarded by the Naval Sea Systems Command, Washington, D.C. Per the terms, BIW will supply designing, planning, and material support services for both the maintenance and modernization of DDG 51 and FFG 7 Ships.

The entire work, related to the deal, will be performed in Bath, ME. General Dynamics will use fiscal 2018 other procurement, operations and maintenance (Navy) funds for completing the task.

A Brief Note on DDG-51 and FFG-7 Ships

The DDG 51 Arleigh Burke-class is a multi-mission warship that features an advanced anti-submarine warfare system, the AEGIS combat system, the Vertical Launching System, two embarked SH-60 helicopters along with advanced anti-aircraft missiles and land-attack missiles. It offers defense against a wide range of threats, including ballistic missiles.

On the other hand, the Perry class FFG-7 is a capable undersea warfare platform. These ships are equipped to protect carrier battle groups, amphibious landing groups, underway replenishment groups and convoys. They can also conduct independent operations to perform counterdrug surveillance and maritime interception operations tasks.

What’s Favoring General Dynamics?

General Dynamics’ Marine Systems unit offers comprehensive maintenance, modernization and lifecycle support services to extend the service life and maximize the value of ships and submarines. Interestingly, as of February 2018, the company had construction contracts for six DDG-51s, scheduled for delivery through 2024, thereby indicating increased revenue recognition from this program.

Notably, Marine System’s revenues of $2,034 million in the first quarter of 2018 reflected a 5.2% year-over-year growth. We may expect the latest contract win along with the aforementioned delivery contracts to add more impetus to this unit’s growth in the upcoming quarters.

Furthermore, President Trump’s fiscal 2019 proposed defense budget includes an investment plan of $179.1 billion for the U.S Navy, which witnessed a 4% surge from the fiscal 2018 budget request. General Dynamics, being a prominent shipbuilder in the United States and considering the favorable budgetary revisions, is expected to win contract of different genres in days ahead.

Price Movement    

General Dynamics’s stock has improved about 0.4% in the last one year compared with the broader industry’s gain of 39.8%. The underperformance may have been caused by the intense competition that the company faces in the aerospace-defense space.

Zacks Rank & Key Picks    

General Dynamics currently carries a Zacks Rank #3 (Hold). A few top-ranked stocks in the same sector are AeroVironment, Inc. (AVAV - Free Report) , The Boeing Company (BA - Free Report) and Wesco Aircraft Holdings, Inc. (WAIR - Free Report) .

While AeroVironment sports a Zacks Rank #1 (Strong Buy), The Boeing Company and Wesco Aircraft Holdings carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AeroVironment delivered an average positive earnings surprise of 147.43% in the last four quarters. The company’s long-term growth rate is pegged at 20%.

The Boeing Company came up with an average positive earnings surprise of 29.51% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 3.98% to $14.61 in the last 90 days.

Wesco Aircraft Holdings’ long-term growth rate is pegged at 12%. The Zacks Consensus Estimate for 2018 earnings has risen by 10% to 77 cents in the last 90 days.

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