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

Details of the Deal

Valued at $376.8 million, the contract is expected to be completed by October 2025. Per the terms of the deal, General Dynamics will provide lead yard support, conduct development studies and design efforts related to Virginia Class submarines.

Most work related to this deal will be executed in Groton, CT.

GD Stock’s Place in Submarine Market

Changes in military dynamics have led to increasing defense spending as a well-funded military can deter sudden assaults by other nations. This has led to increasing spending on submarines, as efficient submarines equipped with nuclear weapons add to military capabilities and deter potential nuclear attacks in sea warfare missions.  Consequently, General Dynamics, a prominent submarine manufacturer, witnesses a solid inflow of contracts involving production and associated support for its submarine. The recent contract win is a bright example of that.

Notably, GD’s Marine Systems business segment is the leading designer and builder of nuclear-powered submarines. Its Electric boat division business is responsible for all aspects of design and engineering and leads the construction of Columbia-class ballistic missile and Virginia-class attack submarines.

In particular, the Virginia-class submarine is one of the most advanced nuclear-powered multisession stealth submarines suitable for marine warfare. The submarine excels in littoral and open-ocean environments and collects intelligence critical to the full spectrum of warfare.

The solid demand for the Virginia-class submarine can be gauged from the fact that General Dynamics, along with an industry partner, is currently working on Blocks IV and V of the Virginia-class submarine program, with 16 Virginia-class submarines in its backlog scheduled for delivery through 2032, as of 2023-end. This is also indicative of the solid footprint that GD enjoys in the submarine market.

Growth Prospects for GD Stock

The growth of the submarine market is being driven by advancements in technology, including the use of enhanced stealth capabilities, which make detection difficult. As a result, many nations are ramping up their investment in military submarines to stay competitive in undersea warfare.

This must have prompted the Morder Intelligence firm to predict that the global submarine market will witness a CAGR of 7.6% during 2024-2026. Such growth trend offered by the global submarine market should benefit General Dynamics with its Electric Boat segment’s growth as this unit is the prime contractor and lead shipyard on all Navy nuclear-powered submarine programs.