General Dynamics Corporation
), subsidiary General Dynamics Bath Iron Works, has received a
modification contract from U.S Navy worth $70.5 million to
provide ongoing planning yard services to the DDG 51 Arleigh
Burke-class guided missile destroyer and the FFG 7 Oliver Hazard
Perry-class frigate programs.
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The contract is an extension of the initial contract received in
June 2012. In June 2012, the company had received contract for
these two ships worth $66.1 million. The contract is valued at
$371.6 million if all the options are exercised and fully funded.
Bath Iron Works handles post-delivery maintenance and
modernization activities for all DDG 51-class ships and FFG
7-class ships. The managing task includes designing, material
kitting, logistics, planning and execution.
One more very common contract received by General Dynamics is for
Virginia-class nuclear-powered attack submarines from the U.S. In
November 2012, the company had received a contract worth $88.8
million to provide research and development and lead-yard
services for Virginia-class nuclear-powered attack submarines
from the U.S Navy.
Recently, the company had received a production contract from the
U.S. Army worth $306 million for 3,726 Handheld, Manpack, Small
Form Fit ("HMS") AN/PRC-155 Manpack radios.
The current contract modification will provide the U.S. Navy with
high-quality and modernization services. This ensures that the
ships of the Navy's surface combatant fleet are ready for use.
Overall, these contracts exhibit the Navy's continued confidence
in the company.
These contracts get benefited from the acquisitions made by the
company of late. For example, in August this year, the company
had completed the acquisition of the Ship Repair and Coatings
Division of Earl Industries. The Ship Repair and Coatings
Division is a prime contractor for nuclear aircraft carrier
multi-ship, multi-option contracts. The contract provides
maintenance, modernization and repair services to all ships of a
class in specific homeport areas. The company also provides
maintenance and repair services to frigates and other classes of
naval ships. This acquisition would improve the company's ability
to compete in the growing naval ship-repair market.
We also note that General Dynamics' revenue exposure is spread
over a broad portfolio of products and services in business
aviation; combat vehicles, weapons systems and munitions;
shipbuilding design, repair and construction; and information
systems, technologies and services. Diversification of revenue
through exposure to a number of uncorrelated markets will keep
the overall growth momentum steady.
However, like all defense majors like
Lockheed Martin Corporation
), the future prospects of the company are tied to the U.S.
defense budget. The company presently retains a short-term Zacks
#3 Rank (Hold) that corresponds with our long-term Neutral
recommendation on the stock.
Based in Falls Church, Virginia, General Dynamics engages in
mission-critical information systems and technologies; land and
expeditionary combat vehicles, armaments and munitions;
shipbuilding and marine systems; and business aviation. The
company operates through four segments: Information Systems &
Technology, Combat Systems, Marine Systems, and Aerospace.