General Dynamics Corporation’s (GD) subsidiary, National Steel and Shipbuilding Company (NASSCO), has entered into a contract with an affiliate of American Petroleum Tankers (“APT”). Per the deal, NASSCO will design and construct four 50,000 deadweight ton liquefied natural gas conversion-ready product carriers for APT. These carriers will have a length of 610 feet.
With a cargo capacity of 330,000 barrels, these tankers have improved fuel efficiency. Being “ECO" designed, the tankers will incorporate the latest environmental protection features. Ecodesign products are made with a special consideration, taking into account environmental impacts of the product during its whole lifecycle.
For example, these tankers have the Ballast Water Treatment System. Ballast water discharges by ships can have a negative impact on the marine environment. This treatment system prevents, reduces or eliminates the transfer of aquatic invasive species and pathogens through the control and treatment of the vessel’s ballast water and sediments.
The company expects to begin construction of the first tanker in the third quarter of 2014 with first delivery to begin in the fourth quarter of 2015 and continue through 2016. During the construction period, the contract will add approximately 800 jobs at NASSCO and more than 165 seagoing union jobs during the operation of the vessels.
DSEC, a subsidiary of Daewoo Shipbuilding & Marine Engineering (DSME) of Busan, South Korea will design the ship for General Dynamics. This demonstrates the company’s continued partnership with Daewoo Shipbuilding. In Dec 2012, General Dynamics had entered into a contract with TOTE, Inc., for the design and construction of two 3,100 TEU LNG-powered containerships. Daewoo Shipbuilding was contracted for the designing of the ship.
General Dynamics is one of two contractors equipped to build nuclear-powered submarines in the U.S. The company’s revenue exposure is spread over a broad portfolio of products and services that will keep the overall growth momentum steady.
However, we remain concerned about the decline in order backlog, given the threat of U.S. defense budget cuts. The company presently retains a short-term Zacks Rank #3 (Hold).
However, stocks well positioned at the moment are Erickson Air-Crane Inc. (EAC), Wesco Aircraft Holdings, Inc. (WAIR) and B/E Aerospace Inc. (BEAV). While Erickson Air-Crane carries a Zacks Rank #1 (Strong Buy), Wesco Aircraft and B/E Aerospace hold a Zacks Rank #2 (Buy).
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