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General Dynamics' NASSCO Wins $91M Deal to Repair USS CVN 77

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General Dynamics Corp.’s (GD - Free Report) business subsidiary, National Steel and Shipbuilding Co. (NASSCO), recently secured a $91.5-million modification contract for performing fiscal 2019 dry-docking phased maintenance work on the USS George H.W. Bush (CVN 77) super carrier ship. The deal was awarded by the Mid-Atlantic Regional Maintenance Center, Norfolk, VA.

Details of the Deal

Per the deal, General Dynamics will execute planning and depot-level maintenance, alterations, and modifications to upgrade and improve the CVN 77’ military and technical capabilities.

Work related to the deal will be performed in Portsmouth, VA and is expected to get completed by February 2021. The company will utilize fiscal 2019 operations and maintenance (Navy) funds to finish the task.

A Brief Note on General Dynamics’ NASSCO

General Dynamics’ business subsidiary NASSCO, based in the San Diego industrial area, has been designing and building ships since 1960. It focuses on designing and building supplementary and support ships for the U.S. Navy as well as oil tankers and dry cargo carriers for the commercial markets. NASSCO also specializes in conducting full-service maintenance and surface-ship repair operations for the Navy’s global force.

What Favors General Dynamics?

NASSCO, between 2014 and 2017, 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.

Furthermore, the fiscal 2019 defense budget provisioned for shipbuilding investment worth $18.4 billion. Such budgetary developments should benefit General Dynamics' NASSCO unit, in terms of more contract wins, as the company is a prominent ship builder in the United States.

Looking Ahead

Per Technavio, the global naval shipbuilding market is expected to showcase a 2% CAGR from 2019 to 2023. This, in turn, should increase the demand for technical services required to upgrade different variants of ships, including super carriers. General Dynamics’ NASSCO will most likely benefit from such projections, the company being one of the world's major submarine manufacturers.

Price Movement

General Dynamics’ shares have lost 21.1% in the past year compared with the industry’s fall of 7.1%. The underperformance may have been caused by the intense competition 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 companies in the same sector are AeroVironment, Inc. (AVAV - Free Report) , Lockheed Martin Corporation (LMT - Free Report) and Northrop Grumman Corporation (NOC - Free Report) .

While AeroVironment sports a Zacks Rank #1(Strong Buy), Northrop Grumman and Lockheed Martin carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AeroVironment came up with average positive earnings surprise of 257.01% in the last four quarters. The Zacks Consensus Estimate for fiscal 2019 earnings has increased 33.3% to $1.48 in the past 90 days.

Teledyne Technologies came up with average positive earnings surprise of 12.92% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has increased 5.26% to $9.00 in the past 90 days.

Northrop Grumman delivered average positive earnings surprise of 28.01% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has moved up 3.53% to $18.44 in the past 60 days.

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