Bath Iron Works, a subsidiary of General Dynamics Corporation (GD), has received a sizeable contract from the U.S. Navy worth $1.8 billion for the construction of DDG 1001 and DDG 1002. The two ships DDG 1001 and DDG 1002, under the Zumwalt-class program, are expected to be delivered in December 2015 and February 2018, respectively. The first ship in this class was DDG-1000.
The current contact allows the company to maintain a strong base of quality shipbuilding jobs in Maine. Additionally, it provides a healthy backlog of work and also reflects the Navy's continued commitment to the DDG-1000 program. Work is already underway at the Bath, Maine, shipyard for DDG 1001 and DDG 1002. The Congress had previously approved funding for advanced procurement and initial construction of these two additional ships.
Going back, in February 2008, General Dynamics had received a contact to build the first Zumwalt-class destroyer, DDG 1000. Later in December 2008, the company received a modification contact option to provide services associated with the detail design and construction of the DDG 1000 Zumwalt-class destroyer. DDG-1000 is more than 50% complete and is scheduled to be delivered in 2014.
The DDG-1000 Zumwalt-class destroyer is the U.S. Navy's next-generation, guided-missile naval destroyer, leading the way for a new generation of advanced multi-mission surface combat ships. Upon completion, it will feature a low radar profile, an integrated power system and a total ship computing environment infrastructure.
General Dynamics was the fourth largest U.S. defense contractor in terms of revenue in fiscal 2010 after The Boeing Company (BA), Lockheed Martin Corporation (LMT) and Northrop Grumman Corporation (NOC). Looking forward, key drivers include the reviving fortunes for the business jet market, its stable business of U.S. military vehicles, an ongoing share repurchase program and strong cash flow generation.
However, the company is largely tied to the U.S. defense budget, where the threat of budget cuts is looming high. Also, we have turned slightly cautious about the company’s steadily dropping order backlog, as well as the recent G650 crash and risks related to the execution of key projects. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.
Headquartered in Falls Church, Virginia, 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. The company operates through four segments: Information Systems & Technology (IS&T), Combat Systems, Marine Systems, and Aerospace.
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