GD Wins Navy Modification Contract - Analyst Blog


General Dynamics Electric Boat, an operating wing of General Dynamics Corp. ( GD ), received two modification contracts worth $16.8 million for offering nuclear and non-nuclear maintenance work on submarines anchored at the Naval Submarine Base in Groton, Conn.

The first contract pertains to the continued operation of the Nuclear Regional Maintenance Department at the submarine base. General Dynamics will offer management, planning, training and nuclear capabilities to support upgrade, maintenance and repairs of the submarines.

The contract is valued at $8.8 million. The original award granted in Apr 2013 has a potential value of $164.0 million for a period of five years.

The second contract worth $8.0 million will see Electric Boat continuing with its New England Maintenance Manpower Initiative at the base. This involves providing a wide range of overhaul, repair and upgrade services to support nuclear submarines, floating dry-docks, support and service craft and other platforms and equipment.

The contract was earlier handed out in Dec 2012 and has a potential value of over $222.3 million for the next five years. The Electric Boat Division is particularly equipped to provide design, construction and lifecycle support service to the U.S. Navy submarines.

Although contracts flows were stable, the order values have been low for General Dynamics owing to the sequestration effect. The company last clinched a sizeable order of $209 million to buy long lead-time material for three Virginia-class submarines in Jul 2013.

The U.S. Navy's military presence in the Asia Pacific region, as indicated by the 2014 defense budget, would require greater operations and maintenance support services. This might continue to bring in lucrative modernization contracts for General Dynamics.

In addition, General Dynamics' diversified business will allow the company to book lofty defense orders in the future.  Currently, the company carries a Zacks Rank #3 (Hold).

However, other better-placed defense players at the moment include Zacks Ranked #2 (Buy) Lockheed Martin Corp. ( LMT ), Huntington Ingalls Industries Inc. ( HII ) and Northrop Grumman Corp. ( NOC ).

GENL DYNAMICS (GD): Free Stock Analysis Report

HUNTINGTON INGL (HII): Free Stock Analysis Report

LOCKHEED MARTIN (LMT): Free Stock Analysis Report

NORTHROP GRUMMN (NOC): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: GD , HII , LMT , NOC

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