General Dynamics (GD) Wins $311M USS Bataan Assault Ship Deal
General Dynamics Corp.’s GD NASSCO business unit recently clinched a contract involving the USS Bataan (LHD 5) amphibious assault ship. The award has been offered by the Naval Sea Systems Command, Washington, D.C.
Valued at $311.2 million, the contract is expected to be completed by May 2026. Per the terms of the deal, General Dynamics will be involved in the maintenance, modernization and repair of the USS Bataan fiscal 2024 docking selected restricted availability.
Work for the contract will be carried out in Norfolk, VA.
What’s Favoring General Dynamics?
The changing dynamics of the military landscape and the rising geopolitical tension make it mandatory for a country to continuously evolve and strengthen its defense structure. To this end, Navy ships form an integral part of any military mission and arm the same in its ship warfare affairs. With the United States being one of the largest weapons manufacturers in the world, the nation enjoys a solid demand for combat-proven assault ships.
It is imperative to mention in this context that General Dynamics is one of the two major combat shipbuilders in the United States. Notably, its NASSCO unit is a renowned builder of assault ships operated by the U.S. Navy. This unit also conducts full-service maintenance and surface-ship repair operations in Navy fleet concentration areas.
As a result, General Dynamics frequently secures contracts from the Pentagon for providing maintenance and repair support for the U.S. Navy ships, like the latest one. Such contract wins, in turn, should further boost revenue growth for GD’s Marine Systems segment, which houses the NASSCO unit and registered 14.8% top-line growth in the last reported quarter.
Growth Prospects
With increased spending by nations for strengthening their sea warfare capabilities, the military shipbuilding market is expected to witness strong demand. Per the Mordor Intelligence firm, the global shipbuilding market is likely to witness a CAGR of 13.3% over the 2024-2029 period. This should boost General Dynamics’ prospects as it remains one of the major contractors for military ship manufacturing.
Other defense majors poised to benefit from the expanding naval combat vessels market are BAE Systems BAESY, Lockheed Martin LMT and Huntington Ingalls Industries HII.
BAE Systems designs, builds, commissions, repairs and supports a full range of complex naval ships, from offshore patrol vessels to aircraft carriers. Its Queen Elizabeth Class Aircraft Carriers are the largest warships ever constructed in the United Kingdom.
BAESY boasts a long-term earnings growth rate of 12.9%. The Zacks Consensus Estimate for BAE Systems’ 2024 sales indicates growth of 34.1% from 2023 levels.
Lockheed manufactures Littoral Combat Ships (LCS). Its freedom-variant LCS, USS Nantucket (LCS 27), is a resilient, flexible warship designed to encounter the evolving missions of the U.S. Navy.
Lockheed’s long-term earnings growth rate is pegged at 4.2%. The Zacks Consensus Estimate for LMT’s 2024 sales implies a growth rate of 2.7% from the 2023 figure.
Huntington Ingalls’ business segment designs and constructs non-nuclear ships for the U.S. Navy and the U.S. Coast Guard, including amphibious assault ships, expeditionary warfare ships, surface combatants and national security cutters.
The long-term earnings growth of Huntington is pegged at 6.5%. The Zacks Consensus Estimate for HII’s 2024 sales indicates a growth rate of 2% from a year ago.
Price Performance
Shares of General Dynamics have gained 23.7% in the past year against the industry’s decline of 7.5%.
Image Source: Zacks Investment Research
Zacks Rank
General Dynamics currently carries a Zacks Rank #4 (Sell).
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