General Dynamics Corporation’s GD subsidiary, General Dynamics NASSCO, has secured a major contract with the U.S. Navy to construct up to eight additional John Lewis-class fleet replenishment oilers (T-AO 214 through 221). The contract for the first ship in this new deal is valued at $780 million. The total contract value of manufacturing all eight ships will likely be more than $6.7 billion.
GD’s John Lewis-class Oilers
The John Lewis-class fleet replenishment oilers play an important role in the U.S. Navy operations by refueling ships while at sea, allowing them to remain operational without returning to port. These vessels can transport 162,000 barrels of oil, ensuring that both combat and support vessels have the fuel necessary for extended missions. In addition to fuel, the oilers can carry dry cargo, such as food, ammunition and spare parts, thereby ensuring that the U.S. Navy is ready for challenging environments.
The ships are also equipped with aviation capabilities, supporting helicopter operations for transporting personnel and supplies. With a top speed of 20 knots, the John Lewis-class oilers provide rapid, efficient replenishment for the fleet, contributing to the overall strength and mobility of U.S. maritime forces.
GD’s Growth Prospects
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’s impressive backlog of $91.3 billion at the end of the second quarter indicates solid demand for its products. It invests heftily to innovate products. It is working on the ultra-long-range, large-cabin jet G700. The jet boasts a technologically advanced flight deck, consisting of new engines that deliver high-speed performance. The G700 also received the FAA certification in March 2024.
With rising global geopolitical tensions, nations are rapidly augmenting their defense purchase to strengthen their warfare capabilities. This has led to an increased demand for defense products such as naval combat vessels, oilers and support ships.
The contract for additional oilers reinforces General Dynamics' position as a leader in naval shipbuilding and repair. The company continues to leverage its diversified expertise across aerospace and defense with a robust portfolio of products.
Stocks to Consider
Other defense companies that are likely to enjoy the perks of the expanding defense market have been discussed below.
Huntington Ingalls Industries HII is the largest military shipbuilding company in the United States and a major partner to the U.S. Navy. It is responsible for building and maintaining a variety of vessels, including aircraft carriers and submarines.
HII has a long-term (three to five years) earnings growth rate of 6.9%. The Zacks Consensus Estimate for 2024 sales indicates year-over-year growth of 2.7%.
Lockheed Martin Corporation LMT is a major defense contractor that frequently secures contracts related to naval defense systems. It is involved in the development of the Aegis Combat System, which is used by the U.S. Navy's vessels.
LMT has a long-term earnings growth rate of 4.7%. The Zacks Consensus Estimate for 2024 sales indicates year-over-year growth of 5.3%.
RTX Corporation RTX is a prominent defense contractor that supplies various systems to the U.S. Navy, including advanced missile systems and radar technology. The company recently won contracts for naval radar and sonar systems, as well as for upgrading the U.S. Navy’s ship defense systems.
RTX has a long-term earnings growth rate of 10.4%. The Zacks Consensus Estimate for 2024 sales indicates year-over-year growth of 7%.
GD Stock’s Price Movement
Shares of GD have gained 10.9% in the past six months compared with the industry’s 3.6% growth.
Image Source: Zacks Investment Research
GD Stock’s Zacks Rank
GD currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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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 Nasdaq, Inc.
