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Huntington Ingalls (HII) Wins Deal to Aid Aircraft Carriers

Huntington Ingalls Industries Inc.’s HII business unit, Newport News Shipbuilding, recently clinched a modification contract for U.S. Navy nuclear aircraft carriers (CVN). The award has been offered by the Naval Sea Systems Command, Washington, DC.

Details of the Deal

Valued at $65.8 million, the contract is expected to be completed by Sep 30, 2027. Per the terms of the deal, Huntington Ingalls will provide engineering and technical support for CVN 80 and CVN 81 aircraft carriers.

Work related to this deal will be executed in Newport News, VA.

Aircraft Carriers & Huntington Ingalls

Huntington Ingalls’ Newport News unit is an expert in engineering, design and construction of U.S. Navy CVNs. These are the largest ships in the U.S. Navy's fleet, with a displacement of more than 90,000 tons.

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The abovementioned unit has designed and built the first next generation ship, Gerald R. Ford class (CVN 78) aircraft carriers, and more than 31 aircraft carriers for the U.S. Navy since 1933. This includes all 10 Nimitz class (CVN 68) aircraft carriers currently in service.

The U.S. defense budget request for fiscal 2024 reflects continued investment in shipbuilding, funding the second Columbia class (SSBN 826) submarine, two Virginia class (SSN 774) attack submarines, two Flight III Arleigh Burke class (DDG 51) destroyers and the final increment of Fallujah (LHA 9).

The budget request also reflects funding for USS Gerald R. Ford class (CVN 78) nuclear aircraft carriers and aircraft carrier refueling programs, and investment in the submarine industrial base. This should benefit Huntington Ingalls’ shipbuilding business significantly.

The aforementioned discussion reflects the solid position that HII enjoys in the nuclear aircraft carrier market, resulting in a strong inflow of contracts for the company. The latest contract win is a bright example of that.

Growth Prospects

Nations are strengthening their defense capabilities amid rising geopolitical tensions. In this context, the demand for military ships with next-generation technology-based warfare capabilities, is gaining momentum. This is due to the system’s growing importance in military missions.

Per a report from Mordor Intelligence, the aircraft carrier ship market is projected to witness a CAGR of more than 2% during the 2023-2028 period. Such solid growth trends indicate ample growth opportunities for Huntington Ingalls, as it enjoys the lucrative position of a prominent aircraft carrier in the market.

A few other defense primes that can gain from the expanding aircraft carrier market are General Dynamics GD, BAE Systems BAESY and Lockheed Martin LMT.

General Dynamics’ NASSCO-Norfolk, a consolidation of two great shipyards, is a Master Ship Repair contractor. It provides high-quality and cost-effective maintenance and modernization for the U.S. Navy.

With facilities in Bremerton, WA, in the Pacific Northwest, NASSCO-Norfolk holds experience in more than 450 ships, a Master Ship Repair Agreement contract, and the maintenance and repair of aircraft carriers from the Navy's amphibious fleet.

GD boasts a long-term earnings growth rate of 8.9%. The Zacks Consensus Estimate for General Dynamics’ 2023 sales indicates an improvement of 5% from the year-ago reported figure.

BAE Systems designs and manufactures naval ships as well as state-of-the-art combat systems and equipment supporting those warships. The company played a key role in the design and construction of the Queen Elizabeth Class Aircraft Carrier, the largest warship in the United Kingdom. It also provides management and delivery of planned overseas support to the aircraft carrier.

BAESY boasts a long-term earnings growth rate of 13.7%. The Zacks Consensus Estimate for BAE Systems’ 2023 sales indicates an improvement of 25.4% from that reported in 2022.

Lockheed’s Surface Electronic Warfare Improvement Program Block 2 systems are used to upgrade warships’ electronic warfare capabilities. This helps warfighters respond to evolving threats.

The company also offers upgrade to the AN/SLQ-32 systems on U.S. aircraft carriers to determine if its potential foes are tracking the ships using electronic sensors.

LMT boasts a long-term earnings growth rate of 6.2%. It delivered an average four-quarter earnings surprise of 7.46%.

Price Performance

Shares of Huntington Ingalls have lost 13.8% in the past six months compared with the industry’s 7.9% decline.

 

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

 

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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Lockheed Martin Corporation (LMT) : Free Stock Analysis 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

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