General Dynamics Corporation
) share price edged up roughly 0.7% to $108.41 on Mar 17, 2014
from Friday's closing price. The share price increased primarily
due to the $642.6 million contract, which the company received
from the U.S. Navy on Mar 14.
The contract calls for General Dynamics to build an Arleigh
Burke-class destroyer, under the DDG 51 ship category, for the
U.S. Navy. The company will construct a total of three DDG 51
ship, including the current one.
General Dynamics' business wing Bath Iron Works will handle this
project. The company will roll out the services from its
facilities at the Bath and South Portland, ME; Cincinnati, OH;
Walpole, MA; York, Coatesville and Erie, PA; Charlottesville, VA;
and several other locations. The deliveries are expected to be
completed by July 2023.
Currently, General Dynamics is constructing two DDG 51 destroyers
- Rafael Peralta and Thomas Hudner. The deliveries are scheduled
to start by 2016 and 2017, respectively.
Steel bodied and gas turbine propulsion DDG 51 Arleigh
Burke-class features advanced anti-submarine warfare system,
AEGIS combat system, the Vertical Launching System, two embarked
SH-60 helicopters, advanced anti-aircraft missiles and Tomahawk
anti-ship and land-attack missiles. These features make the
destroyer a powerful surface combatant positioned in sea.
In addition, the DDG 51 multi-mission guided missile destroyers
offer a whole range of anti-surface, anti-submarine and anti-air
capacities to carrier battle groups, surface action groups,
amphibious groups and replenishment groups.
The aforesaid positive factors propelled the U.S Navy to obtain
nine DDG 51 class destroyers within a time span of 2014 to 2018,
as per the Navy's 2014 budget dated Feb 4, 2014. Increased demand
for the DDG 51class destroyers is expected to ensure stable
future cash inflow for General Dynamics.
It is evident from the order book that General Dynamics has a
strong relationship with the U.S. Navy and gets orders at regular
intervals. On March 11, 2014, the company's Electric Boat unit
received a contract, worth $57.2 million, from the U.S. Navy. Per
the agreement, General Dynamics will organize and execute
maintenance work on a Virginia-class attack submarine called the
USS Minnesota (SSN-783).
General Dynamics' effort towards keeping its commitments in terms
of maintaining product and service standard along with delivery
timing will enable it to receive domestic as well as
international contracts frequently, thereby improving its revenue
Though General Dynamics' Marine Systems division receives
contracts at regular intervals, we remain concerned about the
segment's performance as it contributed less to fourth-quarter
2013 earnings. In addition, the company's total backlog in the
fourth quarter decreased 10.3% year over year to $46 billion.
General Dynamics currently has a Zacks Rank #3 (Hold). However,
some better-ranked stocks in the same industry include
Huntington Ingalls Industries, Inc.
Wesco Aircraft Holdings, Inc.
Lockheed Martin Corp.
). While Huntington Ingalls and Wesco Aircraft Holdings hold a
Zacks Rank #1 (Strong Buy), Lockheed carries a Zacks Rank #2
GENL DYNAMICS (GD): Free Stock Analysis
HUNTINGTON INGL (HII): Free Stock Analysis
LOCKHEED MARTIN (LMT): Free Stock Analysis
WESCO AIRCRAFT (WAIR): Free Stock Analysis
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