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Huntington Ingalls Wins $27M Deal for USS Fitzgerald Repair

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Huntington Ingalls Industries, Inc.'s (HII - Free Report) Ingalls Shipbuilding business unit recently secured a modification contract for carrying out emergent repair and restoration of USS Fitzgerald (DDG 62).  The contract was awarded by the Naval Sea Systems Command, Washington, DC.

The deal, valued at $27.5 million, also entails for the additional collision repairs along with the maintenance and modernization of the USS Fitzgerald. Work related to the deal will be executed in Pascagoula, MS and is scheduled to get completed by January 2020. Huntington Ingalls will utilize fiscal 2018 operations and maintenance (Navy) funds and fiscal 2017 other procurement (Navy) funds to complete the task.

A Brief Note on USS Fitzgerald

The USS Fitzgerald (DDG 62) is a guided missile destroyer battleship belonging to the Arleigh Burke class of surface ships, currently serving the U.S. Navy. While DD represents the basic destroyers per US Navy classifications, G stands for its guided missile armament design. It is built around the Aegis Combat System and the SPY-1D multifunction passive electronically scanned array radar.

What’s Favoring Huntington Ingalls?

Huntington Ingalls is one of the largest military shipbuilders in the country. More than 70% of the active Navy fleet comprises ships from this company. The company’s Ingalls Shipbuilding unit is the largest supplier of U.S. Navy surface combatants and has built nearly 70% of the U.S. Navy fleet of warships, till date.

Notably, Huntington Ingalls’ revenues were $1.7 billion in the first quarter of 2018, which increased 8.7% year over year. This upside was primarily driven by higher volumes in amphibious ships at the Ingalls business division along with higher volumes in aircraft carriers and navy nuclear support services at Newport shipbuilding. We expect the company’s Ingalls division to efficiently improve the construction and modernization of shipbuilding programs in the upcoming quarters and significantly contribute to its revenue growth, thereby.

Furthermore, the U.S. Senate approved the fiscal 2019 U.S. defense budget last month, which provisions for a spending of $18.3 billion on shipbuilding and increasing the end strength for the U.S. Navy. These developments reflect massive growth prospects for shipbuilding giants like Huntington Ingalls, increasing its chances of acquiring major shipbuilding contracts. This, in turn, will boost the company’s
profit margin.

Price Performance

Shares of Huntington Ingalls rallied about 12.4% in a year compared with the industry’s 28.1% growth. The underperformance might have been caused due to intense competition that the company faces in the aerospace-defense space.

Zacks Rank & Other Stocks to Consider

Huntington Ingalls carries a Zacks Rank #4 (Sell). A few better-ranked stocks in the same space are Northrop Grumman (NOC - Free Report) , Textron (TXT - Free Report) and Wesco Aircraft Holdings (WAIR - Free Report) .

While Northrop Grumman sports a Zacks Rank #1 (Strong Buy), Textron and Wesco Aircraft Holdings carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Northrop Grumman delivered an average positive earnings surprise of 13.87% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 7% to $16.62 in the last 90 days.

Textron came up with an average positive earnings surprise of 16.64% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 2.85% to $3.15 in the last 90 days.

Wesco Aircraft Holdings’ long-term growth rate is pegged at 12%. The Zacks Consensus Estimate for 2018 earnings has risen by 10% to 77 cents in the last 90 days.

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