Huntington Ingalls (HII) Unit Wins $120M U.S. Navy Contract

Huntington Ingalls Industries, Inc.’s (NYSE:HII) unit, Ingalls Shipbuilding Division, has clinched a modification contract from the U.S. Navy to provide additional long lead-time material for the Landing Helicopter Assault (LHA) Replacement (LHA(R)) Flight 1 Amphibious Assault Ship (LHA 8).

Details of the Contract

The contract is valued at $120.0 million. It was awarded by the Naval Sea Systems Command, Washington, DC.

Per the latest modification, Huntington Ingalls will procure machinery control system components and software, cargo and aircraft elevators, and gas turbines and refrigeration units.

Work is scheduled to be complete by Jun 2020 and will be performed in Cincinnati, OH and various other locations in the U.S. It will use fiscal 2016 shipbuilding and conversion (Navy) funds.

About the Amphibious Assault Ship & LHA

An amphibious assault ship is a kind of commando carrier used to land and support ground forces on enemy territory. These ships were developed by transforming aircraft carriers into helicopter carriers and they incorporate support for amphibious landing craft.

The largest fleet of such ships is operated by the U.S. Navy, which specifically includes large-deck amphibious ships such as the Landing Platform Helicopter (LPH), Landing Helicopter Assault (LHA), and Landing Helicopter Dock (LHD).

LHA is the hull classification symbol of the Navy for the Tarawa and America classes of normal helicopter-carrying amphibious assault ships. These ships transport Fleet Marine Force personnel and equipment while operating in a deployed Marine Expeditionary Unit.

Huntington — a Key Defense Operator

Huntington Ingalls is the prime industrial employer in Virginia. Over 70% of the active Navy fleet consists of Huntington Ingalls ships. Ingalls Shipbuilding is the sole manufacturer of amphibious assault ships for the Navy.

Huntington Ingalls is the only builder of National Security Cutters (“NSCs”) for the U.S. Coast Guard and one of only two companies that build the DDG-51 Arleigh Burke-class destroyers. The other producer of these destroyers is General Dynamics Corp. (NYSE:GD) .

We expect the growth momentum for Huntington Ingalls to continue given the positive budget revision. The shipbuilding business outlook remains strong, particularly in light of the fiscal 2016 budget and the fiscal 2017 budget proposal. Huntington Ingalls’ shipbuilding programs funded by the 2016 budget comprise the construction of LPD-28 and the 9th NSC as well as expedited development of LX(R) by two years.

The fiscal 2017 budget proposal includes Ohio-Class replacement, advanced procurement for refueling CVN-74, advanced procurement for CVN-80, two Virginia class submarines, two DDG-51s, advanced procurement for LHA-8 and TAO(X), continuation of CVN-79, and investment in a new Coast Guard Icebreaker.

The company enjoys steady flow of contracts from the U.S. Department of Defense (DoD). Last week, its Newport News business division secured a contract, worth $400 million, for conducting repair work on the Navy’s nuclear-powered submarines and special mission submersibles. (Read more: Huntington Wins $400M Contract for Submarine Repair)

Zacks Rank & Key Picks

Huntington Ingalls currently has a Zacks Rank #3 (Hold). A couple of better-ranked stocks in the aerospace and defense space include Engility Holdings, Inc. (NYSE:EGL) and Leidos Holdings, Inc. (NYSE:LDOS) .

Engility has witnessed a 3.3% rise in its stock price in the past one month. On an average, the company has delivered a positive earnings surprise of 12.09% in the trailing four quarters. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Leidos Holdings, a Zacks Rank #2 (Buy) stock, saw a 3.7% rise in its stock price over the last one month. On an average, the company has delivered a positive earnings surprise of 7.93% in the trailing four quarters.

Confidential from Zacks

Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>