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General Dynamics Gets Navy Contract

Zacks Equity Research

General Dynamics Corporation’s (GD) marine business wing Bath Iron Works clinched an $18.0 million contract for the modification of the first DDG-1000 Zumwalt class guided missile destroyer. The production of the first next generation DDG-1000 class destroyer is slated to be completed in 2015.

The contract is an extension of the original $3.1 billion maintenance and support deal that the company received in 2008. The contract will enable General Dynamics to continue lending its expertise and resources for supporting the building and maintenance of the vessel.

The complex body design of the Zumwalt destroyers present challenges which the company needs to study and incorporate in their technological capabilities thereby making the process easier for General Dynamics to construct the next set of destroyers.

General Dynamics has received a string of such maintenance and support contracts beginning 2013. In the first two months of the year, the company received four back-to-back navy contracts totaling $321.5 million. These include General Dynamics Electric Boat seizing modification contracts for the USS Mississippi and USS Hartford as well as for the Virginia Class Submarines.  In addition to this the subsidiary also recently received a submarine safety and maintenance contract.

General Dynamics has a long-standing association with the U.S. Department of Navy. Moreover, the company’s order backlog at the end of fourth-quarter 2012 was a healthy $17.1 billion.  Futhermore, its diversified business operations also helps to keep the growth rate stable.

However, the threat of U.S. defense budget cutbacks is expected to deter near-term development prospects. Presently, General Dynamics carries a Zacks Rank #3 (Hold).

Other stocks in the defense and aerospace domain we currently prefer are Zacks Ranked #2 (Buy) Lockheed Martin Corp. (LMT) and The Boeing Company (BA). Another Zacks Ranked #2 stock Alliant Techsystems Inc. (ATK) is also worth a look.

Based in Falls Church, VA, General Dynamics, engages in mission-critical information systems and technologies; land and expeditionary combat vehicles, armaments and munitions; shipbuilding and marine systems; and business aviation.

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