General Dynamics Corp.'s (NYSE:GD) business subsidiary, National Steel and Shipbuilding Co. (NASSCO), recently secured a $98-million contract to execute docking phased maintenance availability for fiscal 2020. The deal was awarded by the Naval Sea Systems Command, Washington, DC.
Per the terms, General Dynamics’ NASSCO unit will maintain, modernize and repair USS Harpers Ferry (LSD 49) and also provide the required facilities and human resources for the completion of the work. Work related to the deal is expected to get completed by December 2020 and will be performed in San Diego, CA.
What’s Benefitting the NASSCO Unit?
The company’s NASSCO unit specializes in conducting full-service maintenance and surface-ship repair operations for the U.S. Navy. It focuses on designing and building supplementary and support ships for the U.S. Navy as well as oil tankers and dry cargo carriers for commercial markets. Notably, with the increasing global demand for shipbuilding products and services, along with consistent contract flows, the NASSCO unit reflects strong potential in generating revenues, going ahead.
What Favors General Dynamics?
The fiscal 2020 defense budget provisioned for a shipbuilding investment of $34.7 billion, a whopping 89% rise from the fiscal 2019 budget allotment. General Dynamics will benefit significantly from such developments in terms of more contract wins, like the latest one, with the company being a prominent shipbuilder in the United States.
Interestingly, per Technavio, the global naval shipbuilding market is expected to see a CAGR of 2% from 2019 to 2023. This, in turn, should increase the demand for technical services like maintenance and repair, among others, which is pivotal in upgrading several variants of ships. General Dynamics’ NASSCO is likely to benefit from such favorable projections.
Price Performance
In the past three months, shares of General Dynamics have gained about 2.6% against the industry’s 3.6% decline.
Zacks Rank & Stocks to Consider
General Dynamics currently carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the same industry are L3Harris Technologies Inc. (NYSE:LHX) , Leidos Holdings (NYSE:LDOS) and Northrop Grumman Corp. (NYSE:NOC) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
L3Harris Technologies delivered average positive earnings surprise of 5.02% in the last four quarters. The Zacks Consensus Estimate for 2020 earnings has climbed 6.6% over the past 90 days.
Leidos Holdings delivered average positive earnings surprise of 8.93% in the last four quarters. The Zacks Consensus Estimate for 2020 earnings has moved up 3.2% over the past 90 days.
Northrop Grumman delivered average positive earnings surprise of 11.48% in the last four quarters. The Zacks Consensus Estimate for 2020 earnings has climbed 2.7% over the past 90 days.
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