General Dynamics Corp.’s GD Electric Boat division recently secured a $55.9-million modification contract for manufacturing 18 missile tubes to support Columbia-class fleet ballistic missile submarines and the United Kingdom’s Dreadnought-class submarines. The deal has been awarded by the Naval Sea Systems Command, Washington, D.C. Work related to the deal is scheduled to be completed by May 2028 and will be performed in Quonset Point, RI.
General Dynamics’ Missile Tubes
General Dynamics so far has manufactured more than 1.5 million launch tubes in sizes ranging from three feet to more than 25 feet long for U.S. Military ground-launched and ship-launched missile systems. Alongside other submarines, these missile tubes are used in the Columbia-class submarines and the Dreadnought-class submarines. These tubes are deployed in the Dreadnought-class submarines, which have a room for 12 ballistic missile tubes. Similarly, the Columbia-class submarines are equipped to be armed with 16 Trident II D-5 ballistic missiles.
What Favors General Dynamics?
The United States along with many other nations is strategically strengthening its naval power by upgrading missile submarines due to the rising worldwide geopolitical tensions. In this backdrop, General Dynamics enjoys a dominant position as a Navy contractor as the global demand for submarines remains high. In fact, the company is one of the only two contractors in the world equipped to build nuclear-powered submarines.
Furthermore, the fiscal 2020 defense budget approved by the U.S. Senate mid-way last year provisioned a spending plan of $2.2 billion specifically for Columbia-class submarines. Such a stupendous budgetary amendment reflects solid growth prospects for the company in the days ahead.
Per a report by Research and Markets firm, the global submarine market is expected to see a 4% CAGR from 2020 to 2025. This indicates increased demand for different variants of submarines, including the Columbia-class and Dreadnought-class submarines. As submarines are a vital part of the U.S. navy fleets, General Dynamics is likely to benefit from such favorable market trends. Notably, the demand for missile tubes is also likely to increase, given the favorable budgetary amendments and market projections.
Shares of General Dynamics have plunged about 18% in a year compared with the industry’s decline of 26.6%.
Zacks Rank & Key Picks
General Dynamics currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the same space are Leidos Holdings, Inc. LDOS, Huntington Ingalls Industries, Inc. HII and Lockheed Martin Corp. LMT. While Leidos sports a Zacks Rank #1 (Strong Buy), Huntington Ingalls and Lockheed Martin carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Leidos Holdings delivered average four-quarter earnings beat of 11.19%. The Zacks Consensus Estimate for 2020 earnings reflects an annual improvement of 9.3%.
Huntington Ingalls delivered a positive earnings surprise of 2.83% in the last reported quarter. The Zacks Consensus Estimate for 2020 earnings reflects an annual improvement of 8.6%.
Lockheed Martin delivered average four-quarter earnings beat of 15.91%. Its long-term earnings growth currently stands at 6.9%.
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