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Huntington (HII) Wins $90.8M Modification Deal for Submarines
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Huntington Ingalls Industries, Inc.’s (HII - Free Report) business segment, Newport News Shipbuilding (“NNS”), recently clinched a modification contract to provide engineering, technical, trade and program management support for submarines. The Naval Sea Systems Command, Washington D.C., awarded the deal.
Valued at $90.8 million, the majority of the work related to the deal will be carried out in Newport News, VA. The contract is expected to reach completion by September 2024.
What’s Favoring Huntington Ingalls?
To strengthen their defense capabilities, nations are rapidly increasing their defense spending of late. In this context, investments in sea warfare capabilities involving submarines for both defense and offensive proposes have significantly gained traction. This stands to benefit HII as its NNS segment is one of the two contractors in the United States for constructing nuclear-powered aircraft carriers and submarines for the U.S. Navy.
With increased defense spending, the company witnessed order growth for submarines and, subsequently, a consistent rise in the revenues of the NNS segment in the last few quarters. NNS recorded a year-over-year increase of 5% in revenues in the last reported quarter.
Considering the rising demand for submarines in the days ahead, HII may continue to witness a significant order inflow for the construction of new submarines as well as service contracts, like the latest one. This should substantially benefit the company and boost its revenue generation prospects from the NSS business unit.
Growth Prospects
Per the report from Mordor Intelligence, the global submarine market is expected to witness a CAGR of more than 4% over the 2023-2028 period. This stands to benefit Huntington as the company occupies an established position in the submarine market.
Other prominent defense majors that are likely to enjoy the benefits of the expanding submarine market are General Dynamics (GD - Free Report) , Northrop Grumman (NOC - Free Report) and BAE Systems plc (BAESY - Free Report) .
General Dynamics’ Marine Systems segment is the leading designer and builder of nuclear-powered submarines. The company is investing $1.8 billion of capital in expanded and modernized facilities at Electric Boat to support growth in submarine construction.
General Dynamics boasts a long-term growth rate of 8.9%. GD shares have increased 8.1% in the past year.
Northrop’s seabed-to-space advanced multi-domain maritime capabilities enable current and future maritime missions. The company has systems and sensors fielded on Virginia-class submarines, while its WSN-7 is an inertial navigator that allows for precise navigation and aiming of weapons in ships and submarines to operate in areas where GPS is denied.
Northrop’s long-term earnings growth rate is pegged at 4.1%. The Zacks Consensus Estimate for NOC’s 2023 earnings has been revised upward by 0.3% in the past 60 days.
BAE Systems’ Astute class is the largest and most advanced attack submarine for the Royal Navy. Equipped with world-leading sensors, the Astute class carries both Tomahawk Land Attack Cruise Missiles and Spearfish heavyweight torpedoes.
BAE Systems boasts a long-term earnings growth rate of 14%. The Zacks Consensus Estimate for BAESY’s 2023 sales suggests a growth rate of 15.7% from the prior-year reported figure.
Price Movement
In the past three months, shares of Huntington Ingalls have increased 6.3% against the industry’s fall of 1.6%.
Image: Bigstock
Huntington (HII) Wins $90.8M Modification Deal for Submarines
Huntington Ingalls Industries, Inc.’s (HII - Free Report) business segment, Newport News Shipbuilding (“NNS”), recently clinched a modification contract to provide engineering, technical, trade and program management support for submarines. The Naval Sea Systems Command, Washington D.C., awarded the deal.
Valued at $90.8 million, the majority of the work related to the deal will be carried out in Newport News, VA. The contract is expected to reach completion by September 2024.
What’s Favoring Huntington Ingalls?
To strengthen their defense capabilities, nations are rapidly increasing their defense spending of late. In this context, investments in sea warfare capabilities involving submarines for both defense and offensive proposes have significantly gained traction. This stands to benefit HII as its NNS segment is one of the two contractors in the United States for constructing nuclear-powered aircraft carriers and submarines for the U.S. Navy.
With increased defense spending, the company witnessed order growth for submarines and, subsequently, a consistent rise in the revenues of the NNS segment in the last few quarters. NNS recorded a year-over-year increase of 5% in revenues in the last reported quarter.
Considering the rising demand for submarines in the days ahead, HII may continue to witness a significant order inflow for the construction of new submarines as well as service contracts, like the latest one. This should substantially benefit the company and boost its revenue generation prospects from the NSS business unit.
Growth Prospects
Per the report from Mordor Intelligence, the global submarine market is expected to witness a CAGR of more than 4% over the 2023-2028 period. This stands to benefit Huntington as the company occupies an established position in the submarine market.
Other prominent defense majors that are likely to enjoy the benefits of the expanding submarine market are General Dynamics (GD - Free Report) , Northrop Grumman (NOC - Free Report) and BAE Systems plc (BAESY - Free Report) .
General Dynamics’ Marine Systems segment is the leading designer and builder of nuclear-powered submarines. The company is investing $1.8 billion of capital in expanded and modernized facilities at Electric Boat to support growth in submarine construction.
General Dynamics boasts a long-term growth rate of 8.9%. GD shares have increased 8.1% in the past year.
Northrop’s seabed-to-space advanced multi-domain maritime capabilities enable current and future maritime missions. The company has systems and sensors fielded on Virginia-class submarines, while its WSN-7 is an inertial navigator that allows for precise navigation and aiming of weapons in ships and submarines to operate in areas where GPS is denied.
Northrop’s long-term earnings growth rate is pegged at 4.1%. The Zacks Consensus Estimate for NOC’s 2023 earnings has been revised upward by 0.3% in the past 60 days.
BAE Systems’ Astute class is the largest and most advanced attack submarine for the Royal Navy. Equipped with world-leading sensors, the Astute class carries both Tomahawk Land Attack Cruise Missiles and Spearfish heavyweight torpedoes.
BAE Systems boasts a long-term earnings growth rate of 14%. The Zacks Consensus Estimate for BAESY’s 2023 sales suggests a growth rate of 15.7% from the prior-year reported figure.
Price Movement
In the past three months, shares of Huntington Ingalls have increased 6.3% against the industry’s fall of 1.6%.
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.