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Can DDG 1002 Sea Trials Support HII's Naval Shipbuilding Growth?

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Key Takeaways

  • HII secured a $99.1M contract modification for DDG 1002 sea trials, with work expected through October 2028.
  • Continued Navy investment in advanced surface combatants and fleet modernization could support HII's growth.
  • Huntington Ingalls trades at 0.75X forward sales versus the industry's 2.08X.

Huntington Ingalls Industries (HII - Free Report) is positioned to benefit from continued U.S. Navy investment in advanced surface combatants and fleet modernization. As a major naval shipbuilder, the company supports the development and delivery of warships designed to strengthen the Navy’s operational capabilities.

HII’s Ingalls Shipbuilding division in Pascagoula, MS, was awarded a $99.1 million contract modification to incorporate sea-trials work for the DDG 1002 destroyer into a previously awarded contract. The modification increases the contract ceiling, with work expected to be completed by October 2028.

Sea trials are a key stage in a warship’s development, allowing the Navy to assess performance and verify onboard systems before the ship enters service. Successful completion of these activities supports the delivery process and helps ensure that the vessel meets operational requirements.

The award reflects continued Navy spending on shipbuilding and the testing of advanced naval platforms. HII’s established shipbuilding capabilities and experience supporting complex Navy programs position it to participate in future fleet modernization initiatives. However, program execution, cost management and the timely completion of testing activities remain important to delivering expected results.

As the Navy continues to maintain and modernize its fleet, HII could benefit from sustained demand for advanced surface combatants and related shipbuilding services.

Which Other Defense Contractors Could Benefit?

Continued U.S. Navy investment in surface combatants and shipbuilding could also create opportunities for other defense contractors.

General Dynamics (GD - Free Report) : General Dynamics’ Bath Iron Works builds Arleigh Burke-class guided-missile destroyers for the U.S. Navy. Its Electric Boat business also builds Virginia-class and Columbia-class submarines, strengthening its presence across naval shipbuilding programs.

BAE Systems (BAESY - Free Report) : BAE Systems provides naval ship repair, maintenance and modernization services. Its U.S. shipyard operations help extend vessel service life and improve fleet readiness, supporting demand for sustainment work.

The Zacks Rundown for HII

Shares of HII have lost 4% in the past year compared with the industry’s 17.9% decline.

Zacks Investment Research
Image Source: Zacks Investment Research

The company's shares are trading at a discount on a relative basis, with its forward 12-month Price/Sales being 0.76X compared with its industry’s average of 2.13X.

Zacks Investment Research
Image Source: Zacks Investment Research

The Zacks Consensus Estimate for HII’s 2027 earnings has moved south over the past 60 days.

Zacks Investment Research
Image Source: Zacks Investment Research

HII stock currently carries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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