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Huntington Ingalls' (HII) Division Wins $108M Navy Deal

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Zacks Equity Research
·3 min read
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Huntington Ingalls Industries Inc.'s HII unit, Ingalls Shipbuilding, recently secured a $108-million modification contract for providing integrated yard support services to the Littoral combat in-service ships (LCS). The contract was awarded by the Naval Sea Systems Command, Washington, DC.

Details of the Deal    

Per the contract terms, the Ingalls Shipbuilding division will offer ship installation drawings development support, ship change document updates, operating cycle integration program management and work integration package engineering support services.

It will further provide research engineering and modeling, integrated planning yard material support, mechanical and electrical engineering standardization support, alongside other services. Majority of the deal-related work will be performed in Hampton, VA, and Pascagoula, MS. The entire task is expected to be completed by April 2021.

A Brief Note on LCS

Currently, there are two different variants of the Littoral Combat Ship, which are being used and operated by the U.S. Navy, known as Freedom and Independence. Both variants are designed for operating in near-shore environments but also equipped to perform open-ocean operations. It is designed to defeat asymmetric anti-access threats, such as mines, quiet diesel submarines and fast surface craft.

What’s Favoring Huntington Ingalls?

The fiscal 2020 defense budget approved by the U.S. Senate in mid-2019 provisioned a spending plan of $34.7 billion for shipbuilding, reflecting an 88.6% surge from the fiscal 2019 budget. Huntington Ingalls specializes in manufacturing amphibious assault and expeditionary ships along with its associated services. Therefore, such budgetary developments should enable the company to procure more significant contracts related to providing yard support services, like the latest one.

Looking ahead, per Technavio, the global naval shipbuilding market is expected to reach $14.36 billion in 2024, at a CAGR of 3% from 2020. This, in turn, should potentially increase the demand for various combat ships, including the LCS and its required services. Notably, Huntington Ingalls is likely to benefit from such favorable projections, going forward.

Price Movement    

In a year’s time, shares of Huntington Ingalls have lost 10.6% compared with the industry’s 24.2% decline.



Zacks Rank & Other Key Picks

Huntington Ingalls currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other top-ranked stocks in the same sector include Leidos Holdings, Inc. LDOS, AeroVironment, Inc. AVAV and Moog Inc. MOG.A. While AeroVironment sports a Zacks Rank #1, Leidos and Moog carries a Zacks Rank #2, at present.

Leidos Holdings delivered a four-quarter earnings beat of 11.2%, on average. The Zacks Consensus Estimate for 2020 earnings has risen 0.7% to $5.49 over the past 90 days.

AeroVironment came up with a positive earnings surprise of 5.7%, on average, in the last four quarters. The Zacks Consensus Estimate for 2020 earnings has risen 8.6% to $1.77 over the past 90 days.

Moog pulled off a positive earnings surprise of 4.8%, on average, in the trailing four quarters. The Zacks Consensus Estimate for 2019 earnings has moved 0.9% north to $5.55 over the past 90 days.

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Moog Inc. (MOG.A) : Free Stock Analysis Report
 
Huntington Ingalls Industries, Inc. (HII) : Free Stock Analysis Report
 
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Leidos Holdings, Inc. (LDOS) : Free Stock Analysis Report
 
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