Huntington Ingalls (HII) wins agreement to support DDG 51 program

Industries Huntington Ingalls Inc. HII was recently awarded a modification contract involving the DDG 51-class destroyer program. The award was donated by Naval Sea Systems Command, Washington, D.C.

Agreement details

Worth $41.7 million, the contract is expected to be completed by April 2023. Under the terms, Huntington will exercise options to perform site monitoring services for the DDG 51-class destroyer program.

The majority of work related to this agreement will be performed in Pascagoula, MS.

A brief note on DDG-51

The DDG 51 Arleigh Burke class is a multi-mission warship. It includes an advanced anti-submarine warfare system, the AEGIS combat system, the vertical launch system, two onboard SH-60 helicopters as well as advanced anti-aircraft missiles and land attack missiles. Impressively, the warship offers protection against a wide range of threats, including ballistic missiles.

What favor Huntington Ingalls?

The Huntington Ingalls line of business, Ingalls, has extensive experience in manufacturing amphibious and expeditionary assault ships for the United States Navy. As the US Navy’s primary surface combatant, Aegis-equipped Arleigh Burke-class (DDG 51) destroyers enjoy high demand, indicating the possibility of increased revenue recognition from company in the next few days.

We expect the latest contract win will help Ingalls’ Huntington unit achieve solid positive revenue growth over the coming quarters.

Additionally, the fiscal year 2023 defense budget includes a provision of $5.6 billion for the purchase of two DDG-51 ships in 2022. We can therefore expect the relevant contracts and amendments further improve Huntington Ingalls’ operating results.

Look forward

According to the latest report from Mordor Intelligence, the value of the global naval vessels market is expected to grow by $253 billion during the period 2022-2031 at a CAGR of 12.8%. This, in turn, should stimulate the growth of various assault ships, including the DDG-51. Huntington Ingalls – being a major shipbuilding giant – will likely benefit.

Other major combat shipbuilding companies around the world like General dynamics GD, Bae Systems BAESY and Mitsubishi Heavy Industries MHVYF should also benefit from such market projections.

General Dynamics has served the United States Navy by building and delivering next-generation combat ships for decades. The company is a co-contractor with Huntington Ingalls for the construction of the DDG-51 ships.

General Dynamics is posting a long-term earnings growth rate of 9.6%. Over the past year, the stock has gained 31.9%.

Bae Systems designs and manufactures naval vessels and submarines, as well as their advanced combat systems and equipment. In addition, it offers a range of associated services, including training solutions, maintenance and modernization programs to support vessels and equipment in service around the world.

BAE Systems is posting a long-term earnings growth rate of 5.3%. Over the past year, this stock has increased by 35.5%.

Mitsubishi Heavy Industries manufactures naval surface ships as well as submarines. The company also provides after-sales service for destroyers and submarines.

Mitsubishi Heavy Industries posted a surprise average profit of 14.4% over four quarters. Over the past year, this stock has improved by 13.9%.

Price movement

In one year, shares of Huntington Ingalls have gained 6.1% compared to the industrydown 32.5%.

Image source: Zacks Investment Research

Zacks Rank

Huntington Ingalls currently wears a Zacks Rank #2 (Buy). You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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