U.S. markets close in 22 minutes

Huntington Ingalls Wins $146M Deal to Support Assault Ships

Zacks Equity Research

Huntington Ingalls Industries Inc.’s HII Ingalls Shipbuilding unit recently secured a third modification contract, worth $145.6 million, to provide long-lead-time material and advance procurement activities for amphibious assault ship LHA 9 class.The contract was awarded by the Naval Sea Systems Command, Washington, D.C. The modification now brings the total advance funding for LHA 9 to $350 million.

Per the deal terms, Huntington Ingalls will procure long-lead-time material for LHA 9, the fourth LHA(R) America Class amphibious assault warships and the second LHA(R) Flight 1 variant. The majority of work related to this deal will be performed in Milwaukee, WI; Baltimore, MD; and Pascagoula, MS. The entire task related to the deal is scheduled to be completedby February 2024.

Growing Importance of LHA Class Ships

The amphibious assault ship is a kind of commando carrier used to land and support ground forces on enemy territory. The largest fleet of such ships is operated by the U.S. Navy, which specifically includes large-deck amphibious ships, such as the Landing Platform Helicopter (LPH), Landing Helicopter Assault (LHA) and Landing Helicopter Dock (LHD).

The LHA Class Ships, also known as the large-deck amphibious assault ships, are equipped to support the most advanced Marine Corps aircraft, including the MV-22 Osprey and the F-35B Joint Strike Fighter. The LHA Amphibious Assault Ship can also be equipped with AH-1Z Viper attack helicopters, UH-1Y Venom attack helicopters, CH-53E Super Sea Stallion helicopters and others. Prior to the recent contract, the company acquired a $187.5-million contract in May related to the LHA Class Ships. Given the rising terrorist activities across the world, it is evident that the importance of such assault ships is on therise, with the United States strengthening its naval power.

What’s Favoring Huntington Ingalls?

Huntington Ingalls specializes in manufacturing amphibious assault and expeditionary ships and provides more than 70% ships to the U.S. Navy. Interestingly, the fiscal 2021 defense budget proposal provisions for a spending plan of $32.3 billion for shipbuilding. Notably, such budgetary developments should enable the company to procure more significant contracts related to ship construction, like the latest one. Per management, the recent contract will help protect the health of its supplier base and strengthen its efforts to efficiently modernize the nation’s amphibious fleet as it continues to build amphibious ships for the Navy.

Looking ahead, per a report by Technavio, the global naval shipbuilding market is expected to grow to $14.36 billion during the 2020-2024 period at a CAGR of approximately 3%. This, in turn, should potentially boost the demand for various assault ships, including the LHA-9 class warships. Huntington Ingalls — being a major shipbuilding giant — should benefit from such favorable projections, going forward. Additionally, such favorable trends should benefit other warship manufacturers like Bae Systems PLC BAESY and General Dynamics GD.

Price Performance

Shares of Huntington Ingalls have lost 17.1% over a year compared with the industry’s 24.4% decline.



Zacks Rank & A Key Pick

General Dynamics currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the same sector is CAE Inc. CAE, which holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CAE delivered a positive earnings surprise of 3.48%, on average, in the trailing four quarters. The company has a long-term earnings growth rate of 8%.

Zacks’ Single Best Pick to Double

From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.

This young company’s gigantic growth was hidden by low-volume trading, then cut short by the coronavirus. But its digital products stand out in a region where the internet economy has tripled since 2015 and looks to triple again by 2025.

Its stock price is already starting to resume its upward arc. The sky’s the limit! And the earlier you get in, the greater your potential gain.

Click Here, See It Free >>


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
 
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
 
CAE Inc (CAE) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research