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General Dynamics Wins $174M Deal to Support Attack Submarines

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General Dynamics Corp.’s (GD - Free Report) Electric Boat division recently secured a $173.8-million contract for providing engineering, technical, design agent and planning yard support for attack submarines. The deal has been awarded by the Naval Sea Systems Command, Washington, D.C.

Details of the Deal

Under the agreement, Electric Boat will offer design change documentation, configuration management, mechanical and electrical engineering, non-propulsion plant electrical system engineering, propulsion plant engineering, and maintenance engineering support.

It will further provide submarine technical trade support, on-site support, and modernization of submarine/submersible systems and subsystems. Work related to the deal is scheduled to get completed by September 2023. Majority of this work will be performed in Groton, CT.

What Favors General Dynamics?

The United States along with many other nations is strategically strengthening its naval power, due to the rising worldwide geo-political tensions, by upgrading attack submarines. In this backdrop, General Dynamics, being one of the only two contractors in the world equipped to build nuclear-powered submarines, enjoys a dominant global position as a Navy contractor. The latest contract win is an example of that.

Along with construction of attack submarines, demand for complexed technical expertise and support services for submarines is also high. Thus, General Dynamics’ Electric Boat division, which specializes in manufacturing attack submarines, benefits a great deal from such
demand growth.

Looking Ahead

Per Market Research Future firm, the global submarine market is expected to see a 4.24% CAGR from 2018 to 2023. This indicates that the demand for different variants of submarines along with services required to upgrade them will increase further. As submarines are a vital part of the U.S. navy fleets imperative in combat, surveillance, counter-surveillance, and other missions, General Dynamics is likely to benefit from such favorable market projections.

Price Performance

Shares of the company have gained 6.7% in the past three months compared with the industry’s growth of 4.4%.

Zacks Rank & Other Key Picks    

General Dynamics currently carries a Zacks Rank #2 (Buy).

Other similar-ranked stocks in the same sector are Northrop Grumman Corp. (NOC - Free Report) , Lockheed Martin Corp. (LMT - Free Report) and Teledyne Technologies Inc. (TDY - Free Report) . You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Northrop Grumman came up with average positive earnings surprise of 18.50% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has increased 0.62% to $19.42 in the past 60 days.

Lockheed Martin came up with average positive earnings surprise of 17.35% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has increased 1.18% to $20.52 in the past 90 days.

Teledyne Technologies came up with average positive earnings surprise of 6.79% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has increased 1.91% to $9.58 in the past 90 days.

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