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Huntington Ingalls (HII) Arm Wins $41.6M Deal for Combat System

Huntington Ingalls Industries, Inc.’s HII Ingalls Shipbuilding business unit recently clinched a $41.6-million contract to start supplying combat systems for the Zumwalt-class destroyer, Lyndon B. Johnson (DDG 1002), thus supporting the Navy in enhancing the capability of the fleet with its technologically advanced combat system.

As part of the deal, Huntington Ingalls will complete the installation, activation and testing of the combat systems, in addition to beginning program management, labor, materials and facilities for accomplishing industrial and fleet industrial efforts, to support the DDG 1002 combat system.

Benefits of the Contract

The DDG 1002 boasts the features of the latest electric propulsion system along with a wave-piercing tumblehome hull and stealth design. It is also equipped with the most advanced warfighting technology and weaponry, which enable the ship to perform a range of deterrence, power projection, sea control, and command and control missions.

Hence, a ship, with such remarkable features, is likely to witness increased demand, and with HII’s combat system support, it tends to attract the U.S. Navy more, thus resulting in a steady flow of contracts for the company involving the building of the combat system. The latest contract win is a testament to that. This, in turn, should boost Huntington Ingalls’ revenues from the Ingalls Shipbuilding division.

Growth Prospects

The naval battlefield environment is dynamic and demands continuous upgradation with technologically advanced weapons and a system to manage those weapons efficiently. In this context, the naval combat system has evolved as an effective measure, buoyed by its ability to tackle the challenges of the complex sea warfare.

Backed by its strong operational capability in sea warfare, the naval combat system market is likely to witness a surge in demand. In line with this, a Research and Markets firm report anticipates a CAGR of 2.5% in the naval combat system market over the 2022-2027 period.

This should benefit companies like Huntington Ingalls, which enjoy a prime position in building combat systems for the Navy. A few defense majors that can enjoy the perks of the growing naval combat system market are as follows:

Lockheed Martin LMT: Its Aegis Combat System is the Navy’s most modern surface combat system. It was designed as a complete system. The missile launching element, the computer programs, the radar and the displays are fully integrated to work together. This makes the Aegis System the first fully integrated combat system built to defend against advanced air and surface threats.

Lockheed Martin’s long-term earnings growth rate is pegged at 5.5%. Shares of LMT have returned 18.1% value to investors in the past year.

Raytheon Technologies RTX: Its Missiles & Defense serves as the prime mission systems equipment integrator for all electronic and combat systems for the DDG 1000 program, America’s next-generation combat ship. Raytheon provides a ship computing environment, electronic modular enclosures, an integrated undersea warfare system, an MK57 vertical launching system, an advanced gun system and an integrated power system.

Raytheon’s long-term earnings growth rate is pegged at 10.4%. Shares of RTX have returned 4.2% value to investors in the past year.

BAE Systems BAESY: It designs and manufactures naval ships and submarines as well as state-of-the-art combat systems and equipment. Its INTeACT combat management systems provide mission-critical capabilities and a vital advantage in combat.

The long-term earnings growth rate of BAESY is pegged at 9.3%. Shares of BAE Systems have rallied 11.7% in the past year.

Price Movement

In the past year, shares of Huntington Ingalls have rallied 3.7% against the industry’s decline of 0.1%.

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Zacks Rank

Huntington Ingalls 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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