Electric Boat Corp., a unit of General Dynamics Corporation GD, has won a modification contract aggregating $89.8 million from the Naval Sea Systems Command. This contract supplements the previous contract for the purchase of missile tube long lead time material for the common missile compartment program.
This contract, which falls under the Foreign Military Sales program, is jointly held by the U.S. Navy (34%) and the U.K. government (66%). Work on the contract is expected to be completed by year-end 2019.
General Dynamics generates its revenues from a broad portfolio of products and services that help to keep the company’s overall growth momentum steady. The company is one of the only two contractors in the world equipped to build nuclear-powered submarines.
Last week, General Dynamics’ business unit, General Dynamics Information Technology, secured a contract from the Defense Information Systems Agency to provide communications technical services for the U.S. Air Force’s Central Command (USAFCENT) in Asia.The contract has a potential value of $450 million, if all options are exercised, under a five-year agreement (read: General Dynamics to Offer Support to U.S. Air Force in Asia).
On Nov 25, 2015, President Obama signed a $607 billion annual defense policy bill. The bipartisan budget deal comes as a great relief for the U.S. Department of Defense (DoD) after six consecutive years of budget insufficiency as it raised the spending limit by $33 billion for 2016 and by $23 billion for 2017. This allows the Pentagon to get a total of $607 billion in 2016 and $610 billion in 2017.
Subsequently, the outlook for major defense players has improved due to budget agreements, increased demand from the Middle East and the companies' focus on foreign arms sales.
A number of nations, such as India, Japan, the United Arab Emirates, Saudi Arabia and Brazil are increasing defense spending and are thus generating business for the major U.S. defense companies.
Zacks Rank
General Dynamics currently has a Zacks Rank #2 (Buy). Other favorably placed stocks in the aerospace and defense sector are Leidos Holdings, Inc. LDOS, Huntington Ingalls Industries, Inc. HII and TransDigm Group Incorporated TDG. While Leidos sports a Zacks Rank #1 (Strong Buy), both Boeing and TransDigm Group hold the same rank as General Dynamics.
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