Ingalls Shipbuilding division of Huntington Ingalls Industries (HII - Analyst Report) has received a cost-plus-fixed-fee contract to provide life-cycle engineering and support services for USS San Antonio (LPD 17) class of amphibious transport docks of U.S. Navy. The contract, worth $54.0 million, is the third of the four annual options that was associated with a base contract awarded in February 2010.
Per the contract, the company will be providing post-delivery planning and engineering services, systems integration and engineering support services, and research engineering. Moreover, the company will be providing material support, fleet modernization program planning services, supply chain management services as well as maintenance and training for certain LPD 17-class shipboard systems.
U.S Navy’s LPD 17-class ships can replace more than 41 ships, which include the LPD 4, LSD 36, LKA 113 and LST 1179 classes of amphibious ships due to their extraordinary functions. It provides the Navy and Marine Corps with sea-based platforms that are networked and modern and are suitable to operate with most modern platforms, such as the MV-22 Osprey.
The San Antonio-class ships are 684 feet long and 105 feet wide. The ships are designed to deliver up to 800 Marines ashore by landing craft and helicopters. These ships transport the US Marine Corps advanced amphibious assault vehicles, air-cushioned landing craft and the MV-22 Osprey tiltrotor aircraft to troublesome spots throughout the world.
In March 2011, Northrop Grumman Corporation (NOC - Analyst Report) had spun-off Huntington Ingalls, which was a subsidiary of Northrop. Like its spun-off partner, Huntington Ingalls also has been providing services to the U.S. Navy. Recently, the company had received a cost-plus-fixed-fee, level-of-effort contract option worth $142.7 million from the U.S. Navy. As per the contract, the company has to work on operational and decommissioning of U.S. Navy submarines, conversion submarines, special mission submersibles, submarine support facilities and related programs.
Huntington Ingalls Industries designs, builds and maintains nuclear and non-nuclear ships for the U.S. Navy and Coast Guard and provides after-market services for military ships around the globe. Contract for third out of four annual options demonstrate the Navy’s confidence in Huntington. Going forward, these types of contracts would add to the company’s top line and bottom line.
However, this will be offset by apprehension regarding defense cutbacks that is also looming around the other defense majors like General Dynamics Corporation (GD - Analyst Report) and Lockheed Martin Corporation (LMT - Analyst Report) . The company presently retains a short-term Zacks #3 Rank (Hold).