General Dynamics Corporation’s GD business unit, Electric Boat, recently clinched a modification contract involving attack submarines. The award has been offered by the Naval Sea Systems Command, Washington, D.C.
Valued at $235.5 million, the contract is expected to be completed by September 2025. Per the terms of the deal, General Dynamics will provide engineering, technical, design agent and planning yard support for operational strategic and attack submarines.
The majority of work related to this deal will be executed in Groton, CT.
With countries worldwide enhancing their defense capabilities, spending on advanced military systems, including submarines, has been rapidly rising. To this end, it is imperative to mention that General Dynamics is a renowned manufacturer of submarines and also offers planning yard support as well as associated engineering and technical solutions for these submarines. The latest contract win is a prime example of that.
In this context, it is imperative to mention that General Dynamics’ Electric Boat unit is the prime contractor and lead shipyard on all Navy nuclear-powered submarine programs. GD has been investing significant capital over the past several years in expanding and modernizing facilities at Electric Boat to enhance its submarine construction capabilities.
Rising military conflicts, terrorism and border disputes have driven nations across the globe to focus more on national security, with investments in enhancing their submarine fleet. This surge is fueled by the increasing demand for advanced technologies like stealth capabilities, underwater surveillance and long-range strike systems as well as the growing complexity of modern naval warfare.
This is likely to have prompted the Mordor Intelligence firm to forecast a compound annual growth rate of 7.6% for the global submarine market during the 2024-2029 time period.
This is likely to benefit General Dynamics, a prominent contractor in the submarine market. Its Electric boat business division is responsible for all aspects of design and engineering of the construction of Columbia-class ballistic missiles and Virginia-class attack submarines.
Other defense companies that are likely to enjoy the perks of the expanding global submarine market have been discussed below.
Huntington Ingalls Industries HII: Through its Newport News Shipbuilding division, HII is involved in producing the Columbia-class and Virginia-class submarines, two key assets of the U.S. Navy. The company provides fleet services to its submarines around the world, offering modernization, repair and installation services.
Huntington has a long-term (three to five years) earnings growth rate of 7.4%. The Zacks Consensus Estimate for HII’s 2024 sales indicates year-over-year growth of 1.1%.
BAE Systems BAESY: It plays a vital role in the production of advanced submarines, particularly for the United Kingdom’s defense sector. BAE Systems is the primary manufacturer of the Astute-class nuclear submarines, which are integral to the Royal Navy's fleet.
BAE Systems has a long-term earnings growth rate of 11.1%. The Zacks Consensus Estimate for BAESY’s 2024 sales indicates year-over-year growth of 37.3%.
Northrop Grumman Corporation NOC: It is a renowned provider of missile launch systems for naval submarines. The company manufactures Launcher Subsystem hardware to support the Columbia and Dreadnought common missile compartment program.
Northrop has a long-term earnings growth rate of 19.1%. The Zacks Consensus Estimate for NOC’s 2024 sales indicates year-over-year growth of 5.3%.
Shares of General Dynamics have risen 3.6% in the year-to-date period against the industry’s 9.2% decline.
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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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