General Dynamics Nabs $9

General Dynamics Nabs $9.5B US Navy Contract Modification

General Dynamics (GD) has been awarded a $9.47 billion cost-plus-incentive-fee modification by the US Navy. The contract modification exercises an option for construction and test of the lead and second ships of the Columbia class SSBN 826 and SSBN 827, as well as design and engineering support.

“This modification to the integrated product and process development contract supports the fiscal 2021 construction start of the lead ship (and advance procurement, advance construction, coordinated material buys and full construction of the follow hull in fiscal 2024” writes the US Department of Defense.

Work will mainly be performed in Groton, Connecticut; Newport News, Virginia and Quonset Point, Rhode Island and is expected to be completed by April 2030, says the statement. The Naval Sea Systems Command, Washington, D.C., is the contracting activity.

Shares in General Dynamics are currently trading down 21% on a year-to-date basis, and the stock scores a cautious Hold consensus from the Street. That’s with 3 buy ratings offset by 3 hold ratings and 2 sell ratings. Meanwhile the average analyst price target stands at $155 (11% upside potential).

“We remain buyers of GD after the company delivered solid 3Q results. Our price target, however, reduces to $156 (from $164) off lower ’21 ests. as the challenging macro backdrop for commercial aerospace dampens the outlook for Gulfstream and the broader Aerospace segment, which more than offsets a strengthening defense position” explained RBC Capital analyst Michael Eisen on October 28.

For GD’s 4 defense businesses, Eisen sees 5.1% Y/Y combined growth in ’21, vs. 4.9% prior, as new contract wins at Combat Systems and GDIT as well as the continued ramp of the Columbia program drive above budget growth.(See GD stock analysis on TipRanks)

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Credit: TipRanks

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