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GD Wins $2.84B U.S. Navy Contract

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Defense contractor General Dynamics Corporation (GD) won a contract from the Department of Defense (DoD) and the U.S. Navy for four new ships. The contract is worth $2.84 billion.

The latest is a fixed-price incentive firm target contract that calls for General Dynamics to design and construct four DDG 51 class ships, one in fiscal year 2013 and one each in fiscal years 2015-2017. The deal also has an option for a fifth ship that would bring the total value to $3.53 billion.

Huntington Ingalls Industries (HII) also received a fixed-price incentive 10-year sizeable contract worth $3.33 billion from the U.S. Navy for the construction of five DDG 51s. The contract value can go up to $3.39 billion if certain options are implemented. With its five-warship contract, Huntington seems to have beaten GD at the post.

A General Dynamics affiliate, General Dynamics Bath Iron Works and Huntington Ingalls are the only manufacturers of the Arleigh Burke (DDG 51) class of AEGIS destroyers. Bath Iron Works occupies the leading position in designing and building DDG 51 class of AEGIS destroyers as well as the multi-mission DDG-1000 Zumwalt-class destroyer.

Last month, General Dynamics Bath Iron Works performed the keel laying ceremony of DDG 1001, the second ship amongst the planned three-ship Zumwalt class of guided-missile destroyers.

The DDG-1000 Zumwalt-class destroyer is the U.S. Navy's next-generation, guided-missile naval destroyer. Going forward, these destroyers will help in creating a new generation of advanced multi-mission surface combat ships. These ships will consist of a low radar profile, an integrated power system and a total ship computing environment infrastructure.

General Dynamics is engaged in mission-critical information systems and technologies; land and expeditionary combat vehicles, armaments and munitions; shipbuilding and marine systems; and business aviation. The company is equipped to build nuclear-powered submarines in the U.S. Its revenue exposure is spread over a broad portfolio of products and services that will keep the overall growth momentum steady.

However, like other defense majors, Lockheed Martin Corporation (LMT) and Northrop Grumman Corporation (NOC), the prospects of the company are tied to the U.S. defense budget. The company presently retains a short-term Zacks Rank #3 (Hold).

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