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Huntington (HII) Clinches Contract to Aid DDG 51 Assault Ships
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Huntington Ingalls Industries Inc. (HI - Free Report) recently clinched a contract to provide follow-yard support for Arleigh Burke class (DDG 51) guided missile destroyer program. The award has been offered by the Naval Sea Systems Command, Washington, D.C.
Details of the Deal
Valued at $26 million, the contract is expected to be completed by December 2024. Majority of the work related to this deal will be carried out in Pascagoula, MS.
This contract includes options, which, on being exercised, will bring the cumulative value of this contract to $185 million.
What’s Favoring Huntington?
Being the U.S. Navy's primary surface combatant, the Aegis-equipped Arleigh Burke class (DDG 51) guided missile destroyers enjoy solid demand in the naval vessels market. As of December 2022, 34 DDG 51 destroyers were delivered to the U.S. Navy. To this end, it is imperative to mention that Huntington is one of the only two companies that construct DDG 51.
Over time, these assault ships have been constructed in variants, allowing technological advances during construction. As of September 2023, Jack H. Lucas (DDG 125), another variant of DDG 51, was delivered to the U.S. Navy. Moreover, the company successfully launched and christened the Flight III Arleigh Burke-class destroyer, DDG 128 Ted Stevens, during the third quarter of 2023.
Looking ahead, Huntington has contracts to construct nine more variants of DDG 51 ships (including Ted Stevens) in the coming years. This should usher in more order flows for the company, concerning the further development and associated engineering as well as yard support services, like the latest one. Such solid order flows tend to boost HII’s backlog count, which came in at $49.42 billion as of Sep 30, 2023, thereby indicating solid revenue growth prospects for this shipbuilder.
Market Prospects
Nations across the globe are fortifying their defense spending on military weapons and arsenals as they look to strengthen their defense capabilities. This also includes augmented spending on navy ships for enhanced sea warfare capabilities.
As the demand for an efficient security system that can strengthen naval sea warfare capabilities rises, so does the prospect of the naval ship market. Looking ahead, per a report from the Mordor Intelligence firm, the naval vessels market is projected to witness a CAGR of 13.3% during the 2023-2028 period.
This market growth opportunity should boost future operating results of Huntington, which apart from being one of the two primary constructors of assault ships in the United States, is the nation’s sole designer and manufacturer of nuclear-powered aircraft carriers.
Peer Opportunities
Huntington apart, other defense majors that are poised to benefit from the expanding naval vessels market have been discussed below.
BAE Systems (BAESY - Free Report) designs, builds, commissions, repairs and supports a full range of complex naval ships, from offshore patrol vessels to aircraft carriers. This gives customers the capability to carry out extensive naval operations. Its Queen Elizabeth Class Aircraft Carriers are the largest warships ever constructed in the United Kingdom.
BAESY boasts a long-term earnings growth rate of 13.6%. The Zacks Consensus Estimate for BAE Systems’ 2023 sales indicates growth of 33.6% from the 2022 level.
Lockheed Martin (LMT - Free Report) manufactures Littoral Combat Ships (LCS). Its freedom-variant LCS USS Nantucket (LCS 27) is a resilient, flexible warship designed to encounter the evolving missions of the U.S. Navy. LCS 27 is particularly designed to conduct close-to-shore missions.
Lockheed’s long-term earnings growth rate is 8.6%. The stock boasts a four-quarter average earnings surprise of 4.35%.
General Dynamics (GD - Free Report) 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 for the construction of the DDG-51 ships.
General Dynamics boasts a long-term earnings growth rate of 9%. The Zacks Consensus Estimate for GD’s 2023 sales indicates growth of 9% from the 2022 level.
Price Movement
Shares of Huntington have risen 3% in the past year against the industry’s 12.8% decline.
Image: Bigstock
Huntington (HII) Clinches Contract to Aid DDG 51 Assault Ships
Huntington Ingalls Industries Inc. (HI - Free Report) recently clinched a contract to provide follow-yard support for Arleigh Burke class (DDG 51) guided missile destroyer program. The award has been offered by the Naval Sea Systems Command, Washington, D.C.
Details of the Deal
Valued at $26 million, the contract is expected to be completed by December 2024. Majority of the work related to this deal will be carried out in Pascagoula, MS.
This contract includes options, which, on being exercised, will bring the cumulative value of this contract to $185 million.
What’s Favoring Huntington?
Being the U.S. Navy's primary surface combatant, the Aegis-equipped Arleigh Burke class (DDG 51) guided missile destroyers enjoy solid demand in the naval vessels market. As of December 2022, 34 DDG 51 destroyers were delivered to the U.S. Navy. To this end, it is imperative to mention that Huntington is one of the only two companies that construct DDG 51.
Over time, these assault ships have been constructed in variants, allowing technological advances during construction. As of September 2023, Jack H. Lucas (DDG 125), another variant of DDG 51, was delivered to the U.S. Navy. Moreover, the company successfully launched and christened the Flight III Arleigh Burke-class destroyer, DDG 128 Ted Stevens, during the third quarter of 2023.
Looking ahead, Huntington has contracts to construct nine more variants of DDG 51 ships (including Ted Stevens) in the coming years. This should usher in more order flows for the company, concerning the further development and associated engineering as well as yard support services, like the latest one. Such solid order flows tend to boost HII’s backlog count, which came in at $49.42 billion as of Sep 30, 2023, thereby indicating solid revenue growth prospects for this shipbuilder.
Market Prospects
Nations across the globe are fortifying their defense spending on military weapons and arsenals as they look to strengthen their defense capabilities. This also includes augmented spending on navy ships for enhanced sea warfare capabilities.
As the demand for an efficient security system that can strengthen naval sea warfare capabilities rises, so does the prospect of the naval ship market. Looking ahead, per a report from the Mordor Intelligence firm, the naval vessels market is projected to witness a CAGR of 13.3% during the 2023-2028 period.
This market growth opportunity should boost future operating results of Huntington, which apart from being one of the two primary constructors of assault ships in the United States, is the nation’s sole designer and manufacturer of nuclear-powered aircraft carriers.
Peer Opportunities
Huntington apart, other defense majors that are poised to benefit from the expanding naval vessels market have been discussed below.
BAE Systems (BAESY - Free Report) designs, builds, commissions, repairs and supports a full range of complex naval ships, from offshore patrol vessels to aircraft carriers. This gives customers the capability to carry out extensive naval operations. Its Queen Elizabeth Class Aircraft Carriers are the largest warships ever constructed in the United Kingdom.
BAESY boasts a long-term earnings growth rate of 13.6%. The Zacks Consensus Estimate for BAE Systems’ 2023 sales indicates growth of 33.6% from the 2022 level.
Lockheed Martin (LMT - Free Report) manufactures Littoral Combat Ships (LCS). Its freedom-variant LCS USS Nantucket (LCS 27) is a resilient, flexible warship designed to encounter the evolving missions of the U.S. Navy. LCS 27 is particularly designed to conduct close-to-shore missions.
Lockheed’s long-term earnings growth rate is 8.6%. The stock boasts a four-quarter average earnings surprise of 4.35%.
General Dynamics (GD - Free Report) 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 for the construction of the DDG-51 ships.
General Dynamics boasts a long-term earnings growth rate of 9%. The Zacks Consensus Estimate for GD’s 2023 sales indicates growth of 9% from the 2022 level.
Price Movement
Shares of Huntington have risen 3% in the past year against the industry’s 12.8% decline.
Image Source: Zacks Investment Research
Zacks Rank
Huntington currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.