Huntington Ingalls (NYSE:HII) Industries, Inc.’s HII business segment, Newport News Shipbuilding, has recently clinched a modification contract, under which it will provide engineering and technical support for USS John F. Kennedy (CVN-79) aircraft carrier. The deal has been awarded by the Naval Sea Systems Command, Washington, D.C.
Valued at $115 million, the contract is expected to be completed by June 2024. Work related to the deal will be executed in Newport News, VA.
Huntington Ingalls’ Expertise in Aircraft Carriers
Since 1933, Huntington Ingalls’ Newport News has designed and built more than 31 aircraft carriers for the U.S. Navy. These include all 10 Nimitz class (CVN 68) aircraft carriers, currently in active service, and the Gerald R. Ford class (CVN 78) aircraft carrier.
Beginning in 2009, the company received contract awards totaling $7.7 billion for construction preparation, detail design, and construction of the second Gerald R. Ford class (CVN 78) aircraft carrier, which is John F. Kennedy (CVN 79). As far as the company’s progress in aircraft carrier programs are concerned, as of Mar 31, 2021, CVN 79 Kennedy is approximately 81% complete, while CVN 73 USS George Washington is approximately 87% complete.
Moreover, during the first quarter of 2021, its Newport News unit won a $3 billion contract for the refueling and complex overhaul of CVN 74 USS John C. Stennis.
The aforementioned developments reflect Huntington Ingalls’ experience in constructing nuclear aircraft carriers. This in turn should usher in more contracts for the company’s aircraft carrier programs, like the latest one, which will ultimately boost its revenues.
Our View
Huntington Ingalls is one of the largest military shipbuilders in the United States. Over 70% of the active Navy fleet consists of this company’s ships.
In particular, this military shipbuilder’s Newport News division is the nation’s sole designer, builder and refueler of nuclear-powered aircraft carriers. Considering this unit’s aforementioned expertise in aircraft carriers, it is quite obvious that this division frequently secures shipbuilding- related contracts from the U.S. Navy and the country’s foreign allies. The latest contract win is a testament to that.
Evidently, the Newport News division has been a major contributor to Huntington Ingalls’ revenue growth. In the first quarter of 2021, the segment generated revenues of $1.4 billion, constituting 61.8% of the company’s total revenues and also witnessing 5% year-over-year growth.
We expect this segment to reflect similar growth trends in the coming days with steady order flows from Pentagon like the latest one.
Prospects
Looking ahead, per a report by Technavio, the global naval shipbuilding market is expected to reach $14.36 billion during the 2020-2024 period at a CAGR of approximately 3%. This, in turn, is likely to drive demand for various assault ships, including aircraft carriers which should benefit Huntington Ingalls. Other prominent shipbuilders across the globe like Bae Systems PLC BAESY, Mitsubishi Heavy Industries, Ltd. MHVYF and General Dynamics GD are also likely to benefit.
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