BAE Systems Inc. BAESY recently clinched a contract to support the maintenance, modernization and repair of the USS Iwo Jima (LHD 7). The contract covers all required labor, equipment, testing, facilities and quality assurance activities.
Valued at $204.2 million, the contract is expected to be completed in February 2028. The award has been provided by the Naval Sea Systems Command, Washington, D.C.
The majority of the work related to the contract will be carried out in Norfolk, VA.
Benefits of This Contract
This contract strengthens BAE Systems’ role as a key support provider to the U.S. Navy by ensuring steady, long-term work related to fleet maintenance and upgrades. The multi-year nature of the agreement improves revenue visibility through 2028 and supports stable cash flows from service-related activities. Work on the USS Iwo Jima also helps maintain BAE Systems’ presence in an important naval region, which can support ongoing relationships and create opportunities for future maintenance and modernization contracts.
Growth Prospects for BAESY
According to a report from the Mordor Intelligence firm, nations across the globe are fortifying their defense spending on military weapons and arsenals as they look to strengthen their defense capabilities. This also includes augmented spending on navy ships for enhanced sea warfare capabilities. Mordor Intelligence also forecasts that the naval vessels market will witness a compound annual growth rate of 6.46% during the 2025-2030 period.
Such increased spending tends to benefit BAE Systems as its Platforms & Services business manufactures and upgrades combat vehicles, weapons and munitions and provides naval ship repair.
Such features may have resulted in multiple contract wins for BAE Systems.
Opportunities for Other Defense Stocks
Some other defense players that can gain from the expanding naval vessel market are discussed below.
Lockheed Martin LMT: Lockheed’s Rotary and Mission Systems unit supports integrated warfare systems and sensors programs such as the AEGIS Combat System, the Littoral Combat Ship and Multi-Mission Surface Combatant for the U.S. Navy and other allies.
LMT’s long-term (three-to five-year) earnings growth rate is 11.9%. The Zacks Consensus Estimate for 2026 sales implies growth of 4.2% from the prior-year figure.
Huntington Ingalls Industries HII: Huntington Ingalls’ Ingalls Shipbuilding segment constructs amphibious assault ships, expeditionary warfare ships, surface combatants and national security cutters for the U.S. Navy and boasts a strong portfolio of products. The Newport News segment is involved in the design and construction of nuclear-powered aircraft carriers and submarines.
HII’s long-term earnings growth rate is 14.4%. The Zacks Consensus Estimate for 2026 sales implies growth of 4.9% from the prior-year figure.
General Dynamics GD: General Dynamics’ Marine Systems segment is the leading designer and builder of nuclear-powered submarines and a leader in surface combatant and auxiliary ship design and construction for the U.S. Navy.
GD’s long-term earnings growth rate is 13.2%. The Zacks Consensus Estimate for 2026 sales implies growth of 4.1% from the prior-year figure.
BAESY’s Price Performance
In the past year, shares of BAE Systems have gained 89.7% compared with the industry’s 51.3% growth.
Image Source: Zacks Investment Research
BAESY’s Zacks Rank
BAE Systems currently has 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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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
