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U.S. Navy Contract for Huntington

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Aerospace and Defense products manufacturer, Huntington Ingalls Industries’  (HII) business arm, AMSEC LLC, received a contract from the U.S. Navy's Space and Naval Warfare Systems Command (“SPAWAR”) for providing design, production, integration, testing, installation and configuration management related to C5ISR (command, control, communications, computers, combat systems, intelligence, surveillance and reconnaissance) capabilities services for submarine and surface ship building.

AMSEC was one of the winners of the contract. The contract involves a base period of one year and an option period which extends over four years. If the option periods are exercised, then the total value accrued to the consortium awardees will be roughly $900 million.

The development of the project will take place on a global basis and is expected to be concluded in December 2017, if all options are exercised. Going forward, we believe this contract will strengthen Huntington’s position as a provider of C5ISR services in the U.S. market.

Earlier, the company clinched a cost-plus-fixed-fee $54 million contract to offer life-cycle engineering and support services to USS San Antonio (LPD 17) class of amphibious transport docks of the U.S. Navy.

However, the ongoing fiscal pressure leading to a crunch in defense spending is expected to cast its shadow on Huntington’s performance in the near term. The company presently retains a Zacks #3 Rank (Hold).

The Zacks Consensus Estimates for the fourth quarter and full-year 2012 are currently pegged at 89 cents and $2.82 per share, respectively.

Huntington Ingalls recently teamed up with another aerospace and defense major General Dynamics Corporation (GD - Free Report) for a $2.5 billion program for the U.S. Navy involving the construction of two smaller Virginia-class submarines.

With a market capitalization of $2.17 billion, Virginia-based Huntington Ingalls designs, builds, overhauls and repairs ships primarily for the U.S. Navy and Coast Guard.

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