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Huntington Ingalls (HII) Wins Deal to Support DDG 51 Program

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Huntington Ingalls Industries Inc. (HII - Free Report) recently secured a modification contract involving the DDG 51 Class destroyer program. The award has been offered by the Naval Sea Systems Command, Washington, D.C.

Details of the Deal

Valued at $41.7 million, the contract is projected to be completed by April 2023. Per the terms, Huntington will exercise options for the accomplishment of follow-yard services for the DDG 51 Class destroyer program.

The majority of the work related to this deal will be carried out 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.

What is Favoring Huntington Ingalls?

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.

We expect the latest contract win to help Huntington’s Ingalls unit witness solid positive top-line growth in the upcoming quarters.

Moreover, the fiscal 2023 defense budget includes a spending provision of $5.6 billion for procuring two DDG-51 ships in 2022. So, we may expect relevant contracts and subsequent modifications to boost Huntington Ingalls’ operating results.

Looking Ahead

Per the latest report by Mordor Intelligence, the global naval vessels market’s worth is expected to increase $253 billion during the 2022-2031 period at a CAGR of 12.8%. This, in turn, should boost the growth of various assault ships, including DDG-51. Huntington Ingalls — being a major shipbuilding giant — is likely to benefit.

Other major combat shipbuilding companies across the globe like General Dynamics (GD - Free Report) , Bae Systems (BAESY - Free Report) and Mitsubishi Heavy Industries (MHVYF - Free Report) should also benefit from such market projections.

General Dynamics has been serving the U.S. Navy by constructing and delivering next-generation combat ships for decades. The company is a co-contractor with Huntington Ingalls for the construction of the DDG-51 ships.

General Dynamics boasts a long-term earnings growth rate of 9.6%.  In the past year, the stock has gained 31.9%.

Bae Systems designs and manufactures naval ships and submarines, as well as their state-of-the-art combat systems and equipment. Also, it offers an array of associated services, including training solutions, maintenance and modernization programs to support ships and equipment in service around the world.

BAE Systems boasts a long-term earnings growth rate of 5.3%.  In the past year, this stock has risen 35.5%.

Mitsubishi Heavy Industries manufactures naval surface ships as well as submarines. The company also provides after-sales service for destroyers and submarines.

Mitsubishi Heavy Industries delivered a four-quarter average earnings surprise of 14.4%. In the past year, this stock has improved 13.9%.

Price Movement  

In a year’s time, shares of Huntington Ingalls have gained 6.1% against the industry’s 32.5% decline.

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Zacks Rank

Huntington Ingalls currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.