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General Dynamics' (GD) NASSCO Wins $67M Deal to Repair DDG 51

Zacks Equity Research

General Dynamics Corp.’s GD business subsidiary, National Steel and Shipbuilding Co. (NASSCO), recently secured a $67.2-million contract for performing fiscal 2019 dry-docking phased maintenance, modernization and repair works on the USS Arleigh Burke DDG 51 ship. The contract was awarded by Naval Sea Systems Command, Washington, DC.

Per the deal, NASSCO will provide facilities and human resources for coordinating, integrating and completing multiple areas of ship maintenance, repair, and modernization of the DDG 51 class ship. Work related to the deal will be performed in Norfolk, VA and is scheduled to be completed by November 2019.

A Brief Note on DDG-51

The DDG 51 Arleigh Burke-class is a multi-mission warship. It features an advanced anti-submarine warfare system, the AEGIS combat system, the Vertical Launching System, two embarked SH-60 helicopters, and advanced anti-aircraft and land-attack missiles. Impressively, the warship offers protection against a wide range of threats including ballistic missiles.

What Favors General Dynamics’ NASSCO Unit?

General Dynamics’ NASSCO unit conducts full-service maintenance and surface-ship repair operations in four primary locations within the Navy’s largest U.S. ports and at customer locations across the globe. Also, it designs and delivers the world’s first liquefied natural gas (LNG)- powered containerships, using green ship technology, to dramatically decrease emissions while increasing fuel efficiency.

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, fiscal 2019 defense budget includes an investment plan of $18.3 billion for shipbuilding, which comprises a $6-billion spending provision for procuring 3 DDG 51 ships. 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.

Price Movement

General Dynamics’ stock has lost 16.2% in the past year against its industry’s growth of 3.8%.

Zacks Rank & Key Picks

General Dynamics currently carries a Zacks Rank #4 (Sell).

A few better-ranked companies in the same sector are The Boeing Company BA, Northrop Grumman Corporation NOC and Heico Corporation HEI.

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

Boeing delivered average positive earnings surprise of 17.08% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has moved up 8.4% to $19.51 in the past 90 days.

Northrop Grumman came up with average positive earnings surprise of 19.93% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has increased 7.2% to $19.09 in the past 90 days.

Heico Corporation’s long-term growth estimates currently stands at 12.10%. The Zacks Consensus Estimate for 2019 earnings has increased 4% to $2.08 in the past 90 days.

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