General Dynamics Corp.’s GD business unit, Bath Iron Works (“BIW”) recently secured a $126.2-million modification contract for providing integrated planning yard services for the DDG 51 class ship. The contract was awarded by Naval Sea Systems Command, Washington, DC.
Per the deal, BIW will provide designing, planning and material support services for both maintenance and modernization of the DDG 51 class ship. Work related to the deal will be performed in Bath, ME, and is scheduled to be complete by January 2024.
General Dynamics will utilize fiscal 2019 operations and maintenance (Navy), and other procurement (Navy) funds for the task.
A Brief Note on DDG-51
The DDG 51 Arleigh Burke-class is a multi-mission warship. It features an advanced anti-submarine warfare system, the AEGIS combat system, the Vertical Launching System, two embarked SH-60 helicopters, and advanced anti-aircraft and land-attack missiles. Impressively, the warship offers protection against a wide range of threats, including ballistic missiles.
What’s Favoring General Dynamics?
General Dynamics has been serving the U.S. Navy, by constructing and delivering next-generation combat ships for decades. Being the Navy's primary surface combatant, the Aegis-equipped Arleigh Burke-class (DDG 51) destroyers enjoy solid demand in the United States. Such steep demand grants General Dynamics at an advantageous position in the shipbuilding business, with the company being the lead designer and builder of DDG 51.
In fourth-quarter 2018, the company’s Marine Systems, which builds combat ships and provides technical integrated planning yard services, witnessed 11.5% revenue growth on a year-over-year basis. We may expect the latest contract win to add impetus to this segment’s growth in the coming quarters as well.
Furthermore, fiscal 2019 defense budget includes an investment plan of $18.3 billion for shipbuilding. Particularly, this investment comprises a $6-billion spending provision for procuring 3 DDG 51s compared with $4 billion allotted in the prior year’s budget. This has been beneficial for major shipbuilders like General Dynamics, as such favorable budgetary revisions increase the company’s possibility of winning shipbuilding and associated contracts.
Price Movement
General Dynamics’s stock has lost 13.3% in the past year against its industry’s growth of 8.5%.
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Zacks Rank & Key Picks
General Dynamics currently carries a Zacks Rank #3 (Hold).
A few better-ranked companies in the same sector are The Boeing Company BA, Northrop Grumman Corporation NOC and Heico Corporation HEI.
While Boeing sports a Zacks Rank #1 (Strong Buy), Northrop Grumman and Heico carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Boeing delivered average positive earnings surprise of 17.08% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has moved up 5.9% to $19.06 in the past 90 days.
Northrop Grumman came up with average positive earnings surprise of 19.93% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has increased 9.82% to $19.56 in the past 90 days.
Heico has a long-term growth rate of 12.10%. The Zacks Consensus Estimate for 2019 earnings has increased 4% to $2.08 in the past 90 days.
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