U.S. Markets closed

GD Wins DoD Deals Worth $187M

Zacks Equity Research

General Dynamics Corp. (GD) received two Department of Defense (DoD) contracts amounting to $186.6 million yesterday. The total value of the separate contracts disbursed by the DoD was $2.61 billion.

A contract worth $152.4 million went to the company’s Electric Boat Corp. division for continued lead-yard services, development studies and design efforts associated with the Navy’s Virginia-class submarines. The contract will run through Sep 2014.

The contracting activity is the Naval Sea Systems Command; Washington, D.C. The majority of the work will be carried out in Groton, Conn. while the rest will take place at Newport News, Va., Quonset, R.I. and Newport, R.I.

The second contract valued at $34.1 million was awarded to General Dynamics’ Ordnance and Tactical Systems ancillary for the demilitarization and disposal of Multiple Launch Rocket Systems M26 rocket pod containers, rockets and components. The contracting activity is the U.S. Army Contracting Command - Redstone Arsenal (Missile), Redstone Arsenal, Ala.

General Dynamics’ joint Virginia Class submarine program with Huntington Ingalls Industries Inc. (HII) is the backbone of the U.S. Navy’s covert surveillance and reconnaissance operations under sea. The Virginia class of attack submarines is designed for a wide range of deep-sea and littoral missions.

It has been General Dynamics’ most profitable defense offering and will continue to attract deals from the DoD. In early Jul 2013, the company secured a $208.9 million modification contract to buy long lead-time material for three Virginia-class submarines.

The Virginia Class submarines are expected to dominate the Navy’s fleet as is evident from the FY2014 DoD program which involves procurement of two Virginia Class submarines and advanced procurement of another two in FY2015 for $5.5 billion.

More good news awaits General Dynamics as development of the Virginia Payload Module and related technology, prototype components, as well as systems engineering needed for the design and construction might bring in contracts for the company.

However, an estimated sequestration cut of $52 billion in fiscal 2014 is likely to hurt the company’s prospects. General Dynamics presently carries a Zacks Rank #3 (Hold). Other well-placed operators include Zacks Ranked #2 (Buy) Northrop Grumman Corp. (NOC) and B/E Aerospace, Inc. (BEAV).

Read the Full Research Report on NOCRead the Full Research Report on GDRead the Full Research Report on HIIRead the Full Research Report on BEAVZacks Investment Research