General Dynamics (GD) Wins Contract to Aid DDG 51 Ships
General Dynamics Corp.’s GD business unit, Bath Iron Works, recently clinched a modification contract to provide integrated planning yard services for DDG 51 guided-missile destroyer ships. The award has been offered by the Naval Sea Systems Command, Washington, D.C.
Valued at $44.5 million, the contract is expected to be completed by September 2024. Work related to this deal will be carried out in Bath, ME.
What’s Favoring General Dynamics?
Nations across the globe are fortifying their defense spending on military weapons and arsenals as they look to strengthen their defense capabilities. This also includes augmented spending on navy ships for enhanced sea warfare capabilities.
Such increased spending tends to benefit General Dynamics as its Bath Iron Works business unit excels in manufacturing navy ships and provides modernization and lifecycle support for the U.S. Navy.
General Dynamics’ DDG-51 Arleigh Burke-class guided-missile destroyers witness significant demand owing to their wide range of advanced warfighting capabilities in multi-threat air, surface and subsurface environments. It also offers protection against a wide range of threats, including ballistic missiles. Its strong demand is evident from the fact that in 2023, the company won a contract from the Navy for the construction of three Flight III DDG-51 destroyers, with a total of 12 ships in backlog scheduled for delivery through 2032.
Such strong demand, in tandem with excellence in providing unique capabilities in shipbuilding, should continue to boost the company’s order book in the long run. This is likely to enhance its revenue generation prospects.
Growth Prospects
Per a report from Mordor Intelligence firm, the naval combat vessels market is projected to witness a CAGR of 13.3% during the 2024-2029 period.
This growth opportunity should boost General Dynamics’ operating results as it is one of the prime contractors of navy ships. Notably, GD’s Marine Systems segment is the leading designer and builder of surface combatant and auxiliary ships for the U.S. Navy. The segment also provides comprehensive post-delivery services to modernize and extend the service life of Navy ships.
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 of 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 of HII’s 2024 sales indicates a growth rate of 2% from a year ago.
Price Performance
Shares of General Dynamics have increased 24% in the past year against the industry’s 7.2% decline.
Image Source: Zacks Investment Research
Zacks Rank
General Dynamics currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Lockheed Martin Corporation (LMT) : Free Stock Analysis Report
General Dynamics Corporation (GD) : Free Stock Analysis Report
Bae Systems PLC (BAESY) : Free Stock Analysis Report
Huntington Ingalls Industries, Inc. (HII) : Free Stock Analysis Report
