General Dynamics' (GD) Unit Wins $15M Contract From DLA
General Dynamics Corp.’s GD business division, Ordnance and Tactical Systems secured a contract worth $14.7 million for supplying machine gun barrels. The deal has been awarded by the Defense Logistics Agency Land and Maritime, Warren, MI.
Details of the Deal
Per the three-year contract with no option periods, the machine gun barrels will be used by the U.S. Army.
Work related to this deal is scheduled to be completed by Dec 24, 2021. It will be executed in Vermont and will utilize Army working capital funds of fiscal 2018 through 2021.
Regular Orders
General Dynamics holds a strong position in the domestic as well as international defense space. In fact, Huntington Ingalls Inc HII and this defense major are the only two contractors in the world equipped to build nuclear-powered submarines. Also, General Dynamics boasts a diverse product and service portfolio along with a wide customer base. This, in turn, allows the company to win notable contracts from Pentagon and other U.S. allies.
Last month, General Dynamics secured a modification contract worth $109.2 million for procuring Hydra rockets. Again, in September, it had clinched a $341.2 million modification contract to exercise the option for design agent, planning yard, engineering and technical support for in-service nuclear submarines. Also, a $5.1 billion special incentives contract has been awarded to General Dynamics for completing the design of the Integrated Product and Process Development for the Columbia-class ballistic missile submarines (SSBNs). Going forward, we expect such awards to bolster the company’s revenue growth.
Defense Scenario Driving Orders
With the meteoric rise of the Islamic State of Iraq and Syria (ISIS) over the last few years and more developing nations increasing their share of defense spending, global market for defense equipment has been on growth trajectory. This, in turn, has provided a solid impetus to sales in the U.S. Aerospace-Defense industry with the nation being the largest weapon supplier. Again, the growing cross-border tension due to North Korea’s continuous nuclear tests along with radical terrorism has boosted the defense sector in the recent times.
Furthermore, the recent budgetary amendments in the country have favored defense giants like General Dynamics, The Boeing Company BA and Lockheed Martin Corporation LMT, among others. These factors are expected to rake in more orders for these companies in the days to follow.
In July 2017, the U.S. House passed fiscal 2018 defense policy bill worth $696.5 billion. The bill includes $6 billion to boost Navy shipbuilding. If approved, it is anticipated to boost revenue growth for General Dynamics, one of the prime shipbuilders in the United States.
Our Take
General Dynamics’ Ordnance and Tactical Systems is the leading commercial disposer of explosive materials and devices in the United States. Also, it is one of the leading manufacturers of mortar weapons and systems, bomb bodies and propellants. This unit falls under the General Dynamics Combat Systems segment.
During the third quarter of 2017, the Combat Systems segment generated 13% revenue growth year over year. We can expect consistent growth in the segment's top line, going forward. The improvement is anticipated to be driven by strong demand for its products and frequent contract wins.
Price Movement
Shares of General Dynamics have rallied 17.3% in a year, underperforming the broader industry’s gain of 35.9%. This may have been caused by the fact that the company is witnessing declining backlogs in recent times.
Zacks Rank
General Dynamics carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Boeing Company (The) (BA) : Free Stock Analysis Report
General Dynamics Corporation (GD) : Free Stock Analysis Report
Lockheed Martin Corporation (LMT) : Free Stock Analysis Report
Huntington Ingalls Industries, Inc. (HII) : Free Stock Analysis Report
To read this article on Zacks.com click here.
