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Huntington Ingalls Wins $149M Navy Deal for USS Enterprise
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Military shipbuilder, Huntington Ingalls Industries, Inc.'s (HII - Free Report) unit, Newport News Shipbuilding, has clinched a modification contract to procure additional long-lead-time material for USS Enterprise (CVN 80). The work will be completed by Jan 2024.
The deal, which is valued at $148.7 million, has been awarded by the Naval Sea Systems Command, Washington, D.C. Work related to the contract will be carried out in Newport News, VA, and the company will utilize fiscal 2017 shipbuilding and conversion (Navy) funds to complete it.
A Brief Note on USS Enterprise
The USS Enterprise (CVN 80), Gerald R. Ford class’ third aircraft carrier, bears the name of the Navy’s first nuclear-powered aircraft carrier, USS Enterprise (CVN 65).
Once this aircraft carrier enters service, it will replace the USS Dwight D. Eisenhower (CVN 69), a Nimitz-class ship. Notably, the Enterprise is scheduled to be constructed and be operational by 2027.
The air wing of this new USS Enterprise will be capable of supporting more than 75 aircraft of varied kinds including fixed-wing and rotary-wing systems. Moreover, an Electromagnetic Aircraft Launch System (EMALS) will be incorporated in the ship, to replace the steam catapults of the older versions.
Our View
Huntington Ingalls is one of the largest military shipbuilders in the country. Over 70% of the active Navy fleet consists of this company’s ships. Notably, this military shipbuilder’s Newport News division is the nation’s sole designer, builder and refueler of nuclear-powered aircraft carriers. It also offers one of only two shipyards capable of designing and building nuclear-powered submarines.
However, this division has been lagging in performance for the last couple of quarters. In the first quarter of 2017, the segment witnessed more than 2% sales decline due to lower sales volumes on submarines.
Nevertheless, we expect the company’s overall growth momentum to continue in the days ahead, given the recent positive budget revision done by the Trump administration. Meanwhile, the shipbuilding business outlook remains strong, particularly in light of the fiscal 2017 spending bill. The bill include Ohio-Class replacement, advanced procurement for refueling CVN-74, advanced procurement for CVN-80, two Virginia class submarines, two DDG-51s, advanced procurement for LHA-8 and TAO(X), continuation of CVN-79 and investment in a new Coast Guard Icebreaker.
Price Movement
Shares of Huntington Ingalls have rallied 16.3% in the last one year, underperforming the Zacks categorized Aerospace-Defense industry’s gain of 26.2%. This could be because the earlier budget cuts have put pressure on the top line. Also, budget deficits and political uncertainty might make future defense budgets vulnerable to cutbacks. As a result, the company's performance lagged the likes of The Boeing Company (BA - Free Report) , Airbus Group SE (EADSY - Free Report) and General Dynamics Corp. (GD - Free Report) that outperformed the industry.
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Huntington Ingalls Wins $149M Navy Deal for USS Enterprise
Military shipbuilder, Huntington Ingalls Industries, Inc.'s (HII - Free Report) unit, Newport News Shipbuilding, has clinched a modification contract to procure additional long-lead-time material for USS Enterprise (CVN 80). The work will be completed by Jan 2024.
The deal, which is valued at $148.7 million, has been awarded by the Naval Sea Systems Command, Washington, D.C. Work related to the contract will be carried out in Newport News, VA, and the company will utilize fiscal 2017 shipbuilding and conversion (Navy) funds to complete it.
A Brief Note on USS Enterprise
The USS Enterprise (CVN 80), Gerald R. Ford class’ third aircraft carrier, bears the name of the Navy’s first nuclear-powered aircraft carrier, USS Enterprise (CVN 65).
Once this aircraft carrier enters service, it will replace the USS Dwight D. Eisenhower (CVN 69), a Nimitz-class ship. Notably, the Enterprise is scheduled to be constructed and be operational by 2027.
The air wing of this new USS Enterprise will be capable of supporting more than 75 aircraft of varied kinds including fixed-wing and rotary-wing systems. Moreover, an Electromagnetic Aircraft Launch System (EMALS) will be incorporated in the ship, to replace the steam catapults of the older versions.
Our View
Huntington Ingalls is one of the largest military shipbuilders in the country. Over 70% of the active Navy fleet consists of this company’s ships. Notably, this military shipbuilder’s Newport News division is the nation’s sole designer, builder and refueler of nuclear-powered aircraft carriers. It also offers one of only two shipyards capable of designing and building nuclear-powered submarines.
However, this division has been lagging in performance for the last couple of quarters. In the first quarter of 2017, the segment witnessed more than 2% sales decline due to lower sales volumes on submarines.
Nevertheless, we expect the company’s overall growth momentum to continue in the days ahead, given the recent positive budget revision done by the Trump administration. Meanwhile, the shipbuilding business outlook remains strong, particularly in light of the fiscal 2017 spending bill. The bill include Ohio-Class replacement, advanced procurement for refueling CVN-74, advanced procurement for CVN-80, two Virginia class submarines, two DDG-51s, advanced procurement for LHA-8 and TAO(X), continuation of CVN-79 and investment in a new Coast Guard Icebreaker.
Price Movement
Shares of Huntington Ingalls have rallied 16.3% in the last one year, underperforming the Zacks categorized Aerospace-Defense industry’s gain of 26.2%. This could be because the earlier budget cuts have put pressure on the top line. Also, budget deficits and political uncertainty might make future defense budgets vulnerable to cutbacks. As a result, the company's performance lagged the likes of The Boeing Company (BA - Free Report) , Airbus Group SE (EADSY - Free Report) and General Dynamics Corp. (GD - Free Report) that outperformed the industry.
Zacks Rank
Huntington Ingalls currently holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look. See the pot trades we're targeting>>