General Dynamics Wins Deal To Support Virginia-Class Ships
Zacks Investment Research | May 22, 2018 10:27PM ET
General Dynamics Corp.’s (NYSE:GD) business division — Electric Boat — recently clinched a modification contract for developing air conditioning unit component, which will be incorporated in Block V Virginia class boats. Work related to the deal is scheduled to be completed by September 2022.
Details of the Deal
Valued at $16.6 million, the contract was awarded by the Supervisor of Shipbuilding Conversion and Repair, Groton, CT. Per the terms, Electric Boat will procure prototype material and manufacturing for the aforementioned air conditioning units.
Majority of the work will be carried out in York, PA. Fiscal 2018 research, development, test and evaluation (Navy) funding will be utilized to partially finance this contract.
A Brief Note on Virginia-Class Submarine
The Virginia-class submarine program is a class of nuclear-powered fast-attack submarines (SSNs) serving the U.S. Navy. These submarines are designed for a broad spectrum of open-ocean and littoral missions, jointly constructed by General Dynamics and Huntington Ingalls Industries Inc. (NYSE:HII) .
Also, intelligence, surveillance and reconnaissance operations as well as mine warfare are managed by these vessels. In fact, the Virginia-class is one of the three classes of attack submarines used by the U.S. Navy. The other two are the Los Angeles class and the Seawolf class. Valued around $2.7 billion each, these submarines will be operational until 2070.
What’s Favoring General Dynamics?
As one of the only two contractors in the world that are equipped to build nuclear-powered submarines, General Dynamics enjoys a dominant position as a Navy contractor.
Notably, Electric Boat is the prime contractor for the Virginia-class submarine program. This division continues to operate at a two submarines-per-year construction rate and has delivered 15 Virginia-class submarines as of 2017-end, in conjunction with Huntington Ingalls. Impressively, since the delivery of the lead Virginia-class submarine, the cost and time to deliver follow-on ships has been reduced consistently from 84 months to 66 months, while improving the mission capability and quality of the ships at the time of delivery.
The remaining 13 submarines are scheduled for dispatch through 2023. This reflects that the company has opportunities to win more such contracts like the latest one, which in turn, will provide impetus to its growth story.
Furthermore, the Navy has acknowledged the Virginia-class program as one of its top priority, and a sumptuous budget has been allotted for the same. Evidently, the fiscal 2019 defense budget proposal for the U.S. Navy includes a request for spending $58.5 billion to buy 10 new ships, including two Virginia-class submarines. This bodes well for General Dynamics as it is the prime contractor.
Going ahead, we expect the company to win more such contracts like the latest one, which in turn, should enable it to expand footprint in the nuclear-powered submarine industry.
Price Performance
In a year’s time, General Dynamics’ shares have gained 2.6% compared with the broader Zacks Investment Research
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.