Huntington Ingalls (HII) Wins $219M Deal For USS Columbus

Huntington Ingalls Industries, Inc.'s (NYSE:HII) unit, Newport News, has clinched a modification contract from the U.S. Navy to exercise options for performing actions under USS Columbus (SSN 762) engineered overhaul availability.

Details of the Deal

The contract is valued at $219.4 million. Per the modification, Newport News will execute efforts for maintenance, repair, test and routine work including growth work on USS Columbus.

The work, which is scheduled to close by Aug 2019, will be performed in Newport News, VI. It will use fiscal 2017 operations and maintenance (Navy) funds.

A Brief Note on the USS Columbus

USS Columbus (SSN-762), the fourth ship of the Navy to be named after Columbus, OH, is a Los Angeles-class attack submarine. It is to be noted that on Mar 21, 1986, General Dynamics Corporation's (NYSE:GD) Electric Boat division had received a contract to build the ship.

Huntington Ingalls – A Key Defense Operator

Huntington Ingalls is the prime industrial employer in Virginia. Through its Newport News segment, the company operates as the nation's sole designer, builder and refueler of nuclear-powered aircraft carriers. Notably, over 70% of the active Navy fleet comprise Huntington Ingalls ships. The company's Ingalls Shipbuilding segment is the sole manufacturer of amphibious assault ships for the Navy.

Also, we note that 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.

Moving ahead, we expect the company’s growth momentum to continue, given the recent positive budget revision done by Trump administration. Notably, the shipbuilding business outlook remains strong, particularly in light of the fiscal 2017 spending bill. The bill 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.

Price Movement

Shares of Huntington Ingalls have rallied 10.6% in the last one year, underperforming the Zacks categorized Aerospace-Defense industry’s gain of 24.9%. This could be because the earlier budget cuts have put pressure on the top line. Also, budget deficits and political uncertainty might make future defense budgets vulnerable to cutbacks. As a result, the company's performance lagged behind the likes of The Boeing Co. (NYSE:BA) and Airbus Group (PA:AIR) SE (OTC:EADSY) that outperformed the industry.

Zacks Rank

Huntington Ingalls currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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