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The Ingalls Shipbuilding unit of Huntington Ingalls Industries (HII - Snapshot Report) received a contract from the U.S. Coast Guard to build the seventh National Security Cutter (NSC).

The $76.8 million contract will allow Huntington Ingalls to purchase material and components to support construction of the new cutter, Kimball (WMSL 756), at its shipyard in Pascagoula.

At a length of 418 feet and a beam of 54 feet, NSC is the biggest and most technologically advanced class of cutters in the U.S. Coast Guard shipyard. The cutter is intended to substitute the Hamilton-class cutters built in the 1960s. It is equipped for maritime homeland security, law enforcement, marine safety, environmental protection and national defense missions. It plays a major role in boosting the Coast Guard's operational promptness, capacity and effectiveness.

Huntington Ingalls has already procured three NSCs for the Coast Guard and two additional cutters are under construction at its Pascagoula unit. The company’s fourth NSC − Hamilton (WMSL 753) − is expected to launch by the end of 2013 and is 39% complete. It has also recently performed the keel laying ceremony of the fifth cutter, James (WMSL 754), which is about 16% complete.

Last month, Huntington Ingalls received a $487.1 million fixed-price incentive firm target contract to provide the U.S. Coast Guard with a sixth cutter. The company plans to begin the construction on its sixth cutter, Munro (WMSL 755), later this year.

Lockheed Martin Corporation (LMT - Analyst Report) has collaborated with Huntington Ingalls to provide the latter command, control, communications, computers, intelligence, surveillance and reconnaissance (C4ISR) capabilities. Huntington Ingalls remains enthusiastic about its alliance with the defense Goliath.

The largest military shipbuilder in the U.S., Huntington Ingalls is the prime industrial employer in Virginia. Huntington Ingalls, originally an affiliate of Northrop Grumman Corporation (NOC - Analyst Report), was spun off in Mar 2011. It operates major shipyards in Louisiana, Mississippi and Virginia.

Recently, Ingalls Shipbuilding received a fixed-price incentive 10-year contract worth $3.33 billion from the U.S. Navy for the construction of five Arleigh Burke-class destroyers (DDG 51s). The contract also carries an option for engineering change proposals, design budgeting requirements and post-delivery availabilities of these ships. If the option is implemented, the value of the contract would go up to $3.39 billion.

Huntington Ingalls presently retains a short-term Zacks Rank #3 (Hold). We presently prefer Erickson Air-Crane Inc (EAC - Snapshot Report) with a Zacks Rank #1 (Strong Buy).

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