General Dynamics Corporation
) business unit General Dynamics Electric Boat has received a
contract modification worth $61.7 million to continue the
development of U.S. Navy's Common Missile Compartment for the
United Kingdom's Successor ballistic-missile submarine and the
U.S. Ohio replacement submarine. The contract has a total value
of more than $776 million, if all the options are exercised and
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Per the current contract, the company will procure, manufacture
and test prototype material and equipment that will be used in
the manufacture of the Common Missile Compartment.
The deal is an extension of the contract received by the company
in October 2008. Under the contract, the company had to look
after the engineering, technical services, concept studies and
design of a Common Missile Compartment for the next-generation
ballistic missile submarines that was developed for the Royal
Navy and the U.S. Navy.
After 2008, the company had been making contract modifications
with respect to the original contract. In December 2011, it
received a $191.3 million contract modification for concept
studies, engineering and design of a Common Missile Compartment
for the U.K. and U.S submarines. The overall contract had a value
of more than $708 million, provided all options are exercised and
Due to its proven technical capabilities, maintenance and
modernization, and its ability of concept formulation and design
through construction, Electric Boat has been receiving a number
of submarine contracts. Recently, the segment received a $459
million contract modification to provide planning yard work and
engineering and technical support for nuclear submarines.
Recently, General Dynamics Corporation announced its
third-quarter 2012 earnings results. Operating earnings of $1.70
per share fell short of the Zacks Consensus Estimate by $0.07. It
also missed the year-ago figure by 7.1%. General Dynamics
generated total revenue of $7.93 billion in the reported quarter
versus $7.85 billion in the year-ago quarter, reflecting a paltry
growth of 1%.
Going forward, continuous flow of these contracts would generate
unhindered revenue for the company. Moreover, General Dynamics'
revenue exposure that 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
will keep the overall growth momentum steady.
However, like all defense majors like
Northrop Grumman Corporation
Lockheed Martin Corporation
), the future prospects of the company are tied to the U.S.
defense budget. Also, we are concerned about the risks related to
the execution of key projects.
The company presently retains a short-term Zacks #3 Rank (Hold)
that corresponds with our long-term Neutral recommendation on the
Based in Falls Church, Virginia, General Dynamics Corporation is
engaged 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 (IS&T), Combat Systems, Marine Systems, and