Huntington Ingalls Wins $63M USS Fitzgerald Maintenance Deal

Huntington Ingalls Industries, Inc.'s (NYSE:HII) Ingalls Shipbuilding unit recently secured a modification contract for the execution of USS Fitzgerald (DDG 62) emergent repair and restoration. The work is expected to be over by September 2018.

The deal, which is valued at $63 million, has been awarded by the Naval Sea Systems Command, Washington, D.C. Work related to the contract will be carried out in Pascagoula, MS, and the company will utilize fiscal 2018 operations and maintenance (Navy) funds to complete the task.

The deal entails the removal of damaged portions of the ship along with maintenance, modernization and collision repair.

About Ingalls Shipbuilding

Ingalls Shipbuilding manufactures Aegis DDG 51 class guided missile destroyers, LHA 6 class large deck amphibious ships, National Security Cutters for the U.S. Coast Guard and is the sole builder of the Navy’s fleet of San Antonio (LPD 17) class amphibious assault ships.

A Brief Note on USS Fitzgerald

The USS Fitzgerald (DDG 62) is a guided missile destroyer battleship belonging to the Arleigh Burke class of surface ships, currently serving the U.S. Navy. While DD represents the basic destroyers per US Navy classifications, G stands for its guided missile armament design. It is built around the Aegis Combat System and the SPY-1D multifunction passive electronically scanned array radar.

Our View

Huntington Ingalls is one of the largest military shipbuilders in the country. More than 70% of the active Navy fleet comprises ships from this company. Notably, its Ingalls Shipbuilding division is the nation’s largest supplier of U.S. Navy surface combatants and has built nearly 70% of the U.S. Navy fleet of warships.

This division delivered a solid result in the third quarter of 2017. The segment witnessed increased sales volumes and a 2.8% increase in revenues from the year-ago period, primarily on higher revenues in amphibious assault ships. The latest contract can be expected to add more impetus to this division’s growth, in coming days.

Looking ahead, given the positive budget revision done by the Trump administration, we may expect to witness the company’s overall growth momentum to continue with stability. The raised budget will draw more contracts for Huntington Ingalls.

Price Performance

Shares of Huntington Ingalls have rallied about 26.7% in a year, compared with the broader industry’s 43.1%. The stock performance was primarily dented by intense competition in the military shipbuilding space.

Zacks Rank & Key Picks

Huntington Ingalls carries a Zacks Rank #2 (Buy). A few other top-ranked stocks from the same sector are Teledyne Technologies Incorporated (NYSE:TDY) , Leidos Holdings, Inc. (NYSE:LDOS) and Curtiss-Wright Corporation ( (NYSE:CW) ). While Teledyne Technologies sports a Zacks Rank #1 (Strong Buy), Leidos Holdings and Curtiss-Wright Corporation carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Teledyne Technologies posted an average positive earnings surprise of 37.17% for the past four quarters. The Zacks Consensus Estimate for current-quarter earnings rose by 45 cents over the last 60 days.

Leidos Holdings has an average positive earnings surprise of 14.81% for the last four quarters. The Zacks Consensus Estimate for current-year earnings has improved by a penny in the past 30 days.

Curtiss-Wright posted an average positive earnings surprise of 11.78% for the last four quarters. The Zacks Consensus Estimate for current-year earnings has risen by 2 cents in the past 60 days.

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