General Dynamics Electric Boat, a subsidiary of
General Dynamics Corp.
), has received an extension to its previous contract worth
$208.6 million from the U.S. Navy to buy long lead time material
for three Virginia-class submarines.
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The submarines for which lead time material will be provided are
SSN-793, SSN-794 and SSN-795. Long lead-time material includes
steam and electrical-plant components, main propulsion unit and
ship-service turbine generator sets, and miscellaneous hull,
mechanical and electrical-systems components to support
construction of these submarines.
The Virginia-class submarine program is a class of
nuclear-powered fast attack submarines serving the United States
Navy. These submarines are designed for a broad spectrum of
open-ocean and littoral missions. Moreover, they are less costly
than the Seawolf class of attack submarines. Due to their
technical excellence and schedule performance, the Virginia-class
submarines assist the Navy in dominating both the open ocean and
The initial contract for these submarines, for $78 million, was
provided in Apr 2012. Per the contract, the company had to supply
long lead-time material for the Virginia-class submarine SSN-792.
Long lead-time material included Propulsion System, Ship Service
Diesel Generators, Ship Service Transformers, Switchboards,
Propeller Shaft and bearings, Navigation and Communication
Electronic Systems, Trawl Winch System Propeller Shaft and
bearings and many other such items.
Again, in Dec 2012, the company received a contract worth $308
million to purchase long lead-time materials for SSN-793 and
SSN-794. Together these contracts bring the total value to
approximately $595 million.
General Dynamics' revenue exposure is spread over a broad
portfolio of products and services that will keep the overall
growth momentum steady. Electric Boat is a unit of Marine
Systems. Marine Systems is a leading U.S. shipbuilder, designing,
building and supporting a diverse portfolio of ships for the U.S.
Navy and commercial customers. Its products include
nuclear-powered submarines, surface combatants and
combat-logistics ships, and Jones Act commercial ships.
In partnership with the Navy, Electric Boat has been successfully
pursuing its goal to reduce ship costs while focusing on
improvement in overall efficiency. However, like all defense
majors, the future prospects of the company are tied to the U.S.
defense budget. The company presently retains a short-term Zacks
Rank #3 (Hold).
Stocks well placed in the industry are
Erickson Air-Crane Inc.
The Boeing Company
Northrop Grumman Corp.
). While Erickson Air-Crane carries a Zacks Rank #1 (Strong Buy),
The Boeing Company and Northrop Grumman hold a Zacks Rank #2