General Dynamics Corporation’s GD business unit, Electric Boat, recently clinched a modification contract involving Virginia Class submarines. The award has been offered by the Naval Sea Systems Command, Washington, D.C.

Details of GD’s Deal

Valued at $35 million, the contract is expected to be completed by December 2027. Per the terms of the modification contract, the company will provide lead yard support, conduct development studies and assist with design efforts related to Virginia-class submarines.

The work under this contract will be executed in the continental United States.

What’s Favoring GD Stock

With countries worldwide enhancing their defense capabilities, spending on advanced military systems, including submarines, has been rapidly rising. General Dynamics, a renowned manufacturer of submarines that provides yard support and associated solutions for these submarines, thus enjoys a steady stream of contracts for submarine manufacturing and associated services like the latest one.

Notably, Virginia Class submarines are built for modern missions, including anti-submarine warfare, surface combat, special operations and intelligence gathering. Effective in coastal and deep waters, the stealthy design and compatibility of these submarines with other military systems make them vital to the U.S. Navy, strengthening national security and surveillance capabilities.

Such notable features of the aforementioned submarines are likely to have been boosting their demand.

GD’s Growth Prospects

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 2025-2030 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 and leads the construction of Columbia-class ballistic missiles and Virginia-class attack submarines.

Opportunities for Other Defense Players

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 11.1%. The Zacks Consensus Estimate for HII’s 2025 sales indicates year-over-year growth of 3.7%.

BAE Systems BAESY: It plays a vital role in the production of advanced submarines, particularly in 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 10%. The Zacks Consensus Estimate for BAESY’s 2025 sales indicates year-over-year growth of 55.7%.

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 4.2%. The Zacks Consensus Estimate for NOC’s 2025 sales indicates year-over-year growth of 3%.

GD Stock’s Price Movement

Shares of GD have lost 1.9% in the past month compared with the industry’s 0.5% decline.

Image Source: Zacks Investment Research

GD’s Zacks Rank

GD currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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

Northrop Grumman Corporation (NOC) : Free Stock Analysis Report

General Dynamics Corporation (GD) : Free Stock Analysis Report

Bae Systems PLC (BAESY) : Free Stock Analysis Report

Huntington Ingalls Industries, Inc. (HII) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research