General Dynamics Corp.’s (GD - Free Report) subsidiary, National Steel and Shipbuilding Co. (NASSCO), recently secured a contract for performing fiscal 2018 docking phased maintenance work on the USS Bonhomme Richard (LHD 6) assault ship. The task is expected to be completed by May 2020.
Details of the Deal
Valued at $218.7 million, the contract was awarded by the Naval Sea Systems Command, Washington, DC. However, the cumulative value of the contract may reach $249.2 million, if options included in this deal are exercised.
Per the terms of the agreement, General Dynamics will execute maintenance, modernization and repair of the USS Bonhomme Richard vessel in San Diego, CA. The company will utilize fiscal 2018 operations and maintenance and fiscal 2018 other procurement (Navy) funds to finish the task.
What’s Favoring General Dynamics?
General Dynamics’ NASSCO unit conducts full-service maintenance and surface-ship repair operations in four primary locations within the Navy’s largest U.S. ports and at customer locations across the globe. Also, it designs and delivers the world’s first liquefied natural gas (LNG)-powered containerships, using green ship technology, to dramatically decrease emissions while increasing fuel efficiency.
From 2014 to 2017, NASSCO constructed and delivered eight LNG-conversion-ready product tankers for commercial customers. This reflects the subsidiary’s strong potential in generating revenues for General Dynamics. Thelatest contract win indicates the possibility of increased revenue recognition from NASSCO.
Meanwhile, it is imperative to mention that on Aug 13, President Trump gave the final nod for the colossal fiscal 2019 National Defense Authorization Act (NDAA), which sanctions a spending allowance of $717 billion for United States’ national security. This recently approved bill authorizes $24.1 billion for shipbuilding to fully fund 13 new battle force ships and accelerate funding for several future ships. Moving ahead, this should providean impetus to the business of shipbuilders like General Dynamics.
In a year’s time, shares of General Dynamics have lost 1% against the industry’s 24.3% rise. 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 better-ranked stocks in the same sector are Aerojet Rocketdyne Holdings (AJRD - Free Report) , Engility Holdings and Huntington Ingalls Industries (HII - Free Report) .
While Aerojet Rocketdyne Holdings sports a Zacks Rank #1 (Strong Buy), Engility Holdings and Huntington Ingalls carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Aerojet Rocketdyne came up with an average positive earnings surprise of 9.27% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen 30.9% to $1.27 in the past 90 days.
Engility Holdings delivered an average positive earnings surprise of 19% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen 16.8% to $2.02 in the past 90 days.
Huntington Ingalls Industries came up with an average positive earnings surprise of 9.48% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen 3.7% to $17.24 in the past 90 days.
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