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Huntington Ingalls Wins Navy Deal to Support DDG 51 Ships

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Zacks Equity Research
·3 min read
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Huntington Ingalls Industries, Inc. HII recently secured a modification contract for offering follow yard class services (FYS) for the DDG-51 class combat ships. Work related to the deal is scheduled to be over by April 2021.

Details of the Deal

Valued at $23.4 million, the contract was awarded by the Naval Sea Systems Command, Washington, D.C. Per the terms of the deal, the shipbuilder will provide liaison and technical support; engineering, design and configuration management; systems engineering team; along with a few more services associated with the DDG-51 ships.

The majority of the work will be executed in Pascagoula, MS.

A Brief Note on DDG-51

The DDG 51 Arleigh Burke-class is a multi-mission warship. It features an advanced anti-submarine warfare system, the AEGIS combat system, the Vertical Launching System, two embarked SH-60 helicopters along with advanced anti-aircraft missiles and land-attack missiles. Impressively, the warship offers protection against a wide range of threats, including ballistic missiles.

Our View

Huntington Ingalls’ business segment, Ingalls, has in-depth experience in manufacturing amphibious assault and expeditionary ships for the U.S. Navy. Being the U.S. Navy's primary surface combatant, the Aegis-equipped Arleigh Burke class (DDG 51) destroyers enjoy solid demand, indicating the possibility of increased revenue recognition for the company in the coming days.

In fourth-quarter 2019, revenues at the Ingalls segment increaseda mere 0.4% on a year-over-year basis. We expect the latest contract win to help this business unit witness solid positive top-line growth in the upcoming quarters.

Interestingly, per Technavio, the global naval shipbuilding market’s worth is expected to increase $14.36 billion during the 2020-2024 period at a CAGR of 3%. This, in turn, should increase demand for various assault ships, including DDG-51. Huntington Ingalls — being a major shipbuilding giant — should benefit given such favorable projections.

Price Movement    

In a year’s time, shares of Huntington Ingalls have lost 13.6% compared with the industry’s 27.5% decline.



Zacks Rank & Other Stocks to Consider

Huntington Ingalls currently carries a Zacks Rank #2 (Buy). Some other top-ranked stocks in the same sector are AeroVironment, Inc. AVAV, Leidos Holdings, Inc. LDOS and ElbitSystems Ltd ESLT. While AeroVironment sports a Zacks Rank #1 (Strong Buy), Moog and Elbit Systems hold a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

AeroVironment came up with average positive earnings surprise of 5.72% in the last four quarters. The Zacks Consensus Estimate for fiscal 2020 earnings indicates year-over-year improvement of 1.7%.

Leidos pulled off average positive earnings surprise of 11.19% for the trailing four quarters. The Zacks Consensus Estimate for 2020 earnings indicates annual improvement of 8.7%.

Elbit Systems pulled off positive earnings surprise of 11.26% in the last reported quarter. The Zacks Consensus Estimate for 2020 earnings indicates annual improvement of 12.7%.

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Elbit Systems Ltd. (ESLT) : Free Stock Analysis Report
 
Huntington Ingalls Industries, Inc. (HII) : Free Stock Analysis Report
 
AeroVironment, Inc. (AVAV) : Free Stock Analysis Report
 
Leidos Holdings, Inc. (LDOS) : Free Stock Analysis Report
 
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