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General Dynamic Corporation’sGD business unit, Electric Boat, recently won a modification contract to support Virginia-class submarines. The deal has been awarded by the Naval Sea Systems Command, Washington, D.C.
Details of the Deal
Valued at $269.5 million, the contract is expected to be completedby Oct 16, 2022. The latest modification has been made to provide lead yard support for Virginia-class submarines. It includes development studies and design efforts for the fleet of this nuclear-powered submarine.
Majority of the work related to this deal will be executed in Groton, CT.
Factors Favoring General Dynamics
Rising geo-political tensions have persuaded countries to increase their budget spending on defense systems. Apart from the United States, several other countries, especially emerging economies, the Middle-East and Asia-Pacific, have enhanced their spending on upgrading their defense capabilities. In this context it is imperative to mention that missile submarines with undersea warfare capabilities form an integral part of any nation’s defense system.
In fact, the Virginia-class submarine, co-designed by General Dynamics and Huntington IngallsHII, includes all advanced nuclear-powered multisession stealth submarines features that would be necessary for any marine warfare. The submarine excels in littoral and open-ocean environments, and collects intelligence critical to the full spectrum of warfare. They are also capable of extended submerged operations with superior stealth, endurance, mobility and firepower.
Such enhanced features boosted the demand for Virgin-class submarines and provided General Dynamicfurther scope to grow.The companyalready enjoys a dominant position as the manufacturer of nuclear-powered submarines. The company is well-poised to meet the solid demand for the submarine in the days ahead, thus providing a boost to its top-line growth.
Evidently, General Dynamic Electric Boat aims to build two submarines each year for a period of five years. The company has 18 Virginia-class submarines in its backlog, which are scheduled for delivery in 2029, thereby reflecting solid revenue growth opportunities.
In fact, in order to meet the increased demand for the submarine and improve the production rate, General Dynamic has been making huge investments with an aim to modernize and expand its facility at Electric Boat for submarine construction. Evidently, the company boasts a planned expenditure of $1.8 billion on the facility.
As nations worldwide strengthen their defense systems, the trend shows that demand for submarines is remarkably poised to grow. Evidently, per a report from Research and Markets firm, the global submarine market is projected to witness a CAGR of 4% during the period of 2020-2024. Such strong growth trends indicateample growth opportunities for General Dynamic, with its Electric Boat being the prime contractor and lead shipyard on all Navy nuclear-powered submarine programs.
Other submarine makers that are likely to benefit from such favorable market trends are BAE Systems BAESY and Mitsubishi Heavy Industries MHVYF.
BAE Systems’ Astute class submarines are the U.K.’s largest and most powerful attack submarines and can strike at targets up to 1,000km from the coast with pin-point accuracy. Meanwhile, Mitsubishi is well-known for its two submarines, namely SETOSHIO and SORYU.
In the past one year, shares of General Dynamic have gained 50%, againstthe industry’s decline of 8.8%.
Image Source: Zacks Investment Research
General Dynamic currently carries a Zacks Rank #2 (Buy).
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General Dynamics Corporation (GD) : Free Stock Analysis Report
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