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General Dynamics Wins $26.5M Deal to Support DDG 1000 Ships

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General Dynamics Corp.’s (GD - Free Report) Bath Iron Works (“BIW”) unit recently secured a $26.5-million cost-plus-award-fee, cost-plus-fixed-fee, cost and firm-fixed-price contract. The deal was awarded by the Naval Sea Systems Command, Washington, DC.

The contract granted to General Dynamics has an option which, if exercised, would raise the cumulative value of the contract to $86.7 million.

Details of the Deal

Per the contract, BIW unit will provide for planning yard efforts such as engineering, technical, planning, ship configuration, data and logistics efforts for DDG 1000-class destroyers post-delivery and in-service life cycle support plus shock qualification test and analysis.

Work is scheduled to be completed by December 2023 and will be performed in Bath, ME (92%); Gardena, CA (1%); Atlanta, GA (1%); Muscatine, IA (1%); Patterson, NJ (1%); Saratoga Springs, NY (1%) and other locations below one percent (3%).

A Synopsis on DDG 1000

General Dynamics’ DDG 1000 destroyer ship is designed with the sailor in mind. The Zumwalt-class destroyers are America’s next-generation combat ships. These ships are equipped with numerous technological enhancements including a low radar profile, an integrated power system and a software environment that ties together nearly every system on the ship.

DDG-1000s will provide independent forward presence and deterrence, support special operations forces and operate as an integral section of joint and combined expeditionary forces. The vessel is easier to operate because of its automation, requiring fewer crew members. The ship's technology also protects sailors serving on board better from the destroyer. Its sleek, stealthy lines masquerade the DDG 1000 on enemy radars as a small fishing boat.

Budgetary Advancements to Aid General Dynamics

President Donald Trump had proposed Pentagon fiscal 2019 defense budget in February 2018 that provisioned investments of $717 billion for rebuilding the U.S. military into a more capable, lethal and geared up Joint Force. Of the total, $686.1 billion is being kept as funding for the Pentagon, reflecting 5% real growth over the initial FY 2018 Presidential budget. Moreover, the defense financial plan stipulated a capex of $194.1 billion for building ships, aircraft carriers and submarines for the U.S. Navy.

Such inclusions reflect solid growth for General Dynamics’s BIW unit, which in turn, are likely to boost the company’s profit margin. Another company, Huntington Ingalls Industries, Inc (HII - Free Report) , is also projected to benefit from this budget.

Price Movement

General Dynamics’ stock has lost 23.9% in the past 12 months, wider than the industry’s decline of 11.1%.



Zacks Rank & Key Picks

General Dynamics currently carries a Zacks Rank #3 (Hold). A few better-ranked companies in the same space are Lockheed Martin Corporation (LMT - Free Report) and The Boeing Company (BA - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Lockheed Martin came up with average earnings surprise of 13.92% in the trailing four reported quarters. The Zacks Consensus Estimate for current-year earnings has been revised 2.9% upward to $17.51 in the past 90 days.

Boeing pulled off average beat of 28.01% in the previous four reported quarters. The Zacks Consensus Estimate for 2018 bottom line has been raised 3.1% to $15.05 in the past 90 days.

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