Military shipbuilder, Huntington Ingalls Industries Inc.'s (HII - Free Report) unit, Ingalls Shipbuilding, has clinched a modification contract to continue providing integrated planning yard support for CG 47 and DD 963 class ships. Work for this deal will be over by September 2018.
Details of the Contract
Valued at $73 million, the contract has been awarded by the Naval Sea Systems Command, Washington, D.C. The modification includes options that would bring the cumulative value of this deal to $150.8 million, if exercised.
Per the modification, Ingalls Shipbuilding will offer planning yard support like Navy modernization program planning, ship change planning development and installation as well as operating cycle integration program management. It will also provide type commander support, mobile assist teams, rotatable equipment pools, ship configuration and logistics support, provisioned items orders and other material support, along with surface ship life cycle management support.
Apart from these, the company will deliver hull mechanical and electrical engineering standardization efforts, apart from providing diminished manufacturing sources as well as material shortages identification, tracking, and resolution support.
Per the deal, Huntington Ingalls will carry out the work in Pascagoula, MS. The company will utilize fiscal 2017 other procurement (Navy), and operations and maintenance (Navy) funds to complete operations.
A Brief Note on CG-47 & DD 963
USS Ticonderoga (CG 47) is an Aegis guided missile cruiser, jointly developed by Huntington Ingalls and General Dynamics Corp. (GD - Free Report) . Raytheon Company’s (RTN - Free Report) Tomahawk missiles were deployed in these warships. Currently, they are equipped with Aegis Combat System, which integrates the cruiser’s electronic sensors and weapons systems to engage anti-ship missile threats.
Notably, Lockheed Martin Corporation’s (LMT - Free Report) AEGIS or Advanced Electronic Guidance and Instrumentation System is an integrated missile-guidance system, used by the U.S. Navy and allied ships to protect the battle group.
Meanwhile, built by Huntington Ingalls, DD 963 Spruance-class destroyers were developed for the primary mission of anti-submarine warfare including operations as an integral part of attack carrier forces. It was designed to hunt down and destroy high speed submarines in all weather but can also engage ships, aircraft, and shore targets. These multi-purpose combatants are also capable of providing naval gunfire support in conjunction with Marine amphibious operations worldwide.
Huntington Ingalls is one of the largest military shipbuilders in the country. Over 70% of the active Navy fleet consists of Huntington ships.
Going forward, the company's overall growth momentum is expected to continue, given the recent positive budget revision done by the Trump administration. In this regard, it is imperative to mention the fiscal 2017 spending bill, which include Ohio-Class replacement, advanced procurement for refueling CVN-74, advanced procurement for CVN-80, two Virginia class submarines and two DDG-51s, advanced procurement for LHA-8 and TAO(X), besides continuation of CVN-79 and investment in a new Coast Guard Icebreaker.
Moreover, we believe the recently won contract by Huntington Ingalls to be a part of this spending bill and indicative of the fact that the U.S. Navy remains focused toward modernizing its existing fleet of warships. Hence, we can expect to witness more such contracts for Huntington Ingalls, in the coming days, which in turn will boost the company’s growth trajectory.
Shares of Huntington Ingalls have rallied 32.7% in the last year, underperforming the industry’s gain of 41.6%. This could be because the earlier budget cuts have put pressure on the top line. Additionally, budget deficits and political uncertainty might make future defense budgets vulnerable to cutbacks.
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.
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