Huntington Ingalls (HII) Wins CVN 74 Aircraft Carrier Deal

Huntington Ingalls Industries Inc.’s HII business unit, Fleet Support Group, recently secured a contract involving USS John C. Stennis (CVN-74) aircraft carrier. The award has been offered by the Supervisor of Shipbuilding, Conversion and Repair, U.S. Navy, Newport News, VA.

Details of the Deal

Valued at $18.6 million, the contract is projected to be completed by March 2024. Per the terms of the deal, Huntington Ingalls will offer engineering services and planning for USS John C. Stennis (CVN 74) refueling complex overhaul (RCOH). It will also provide maintenance and operator training as well as technical and repair support.

These efforts will be intended for the maintenance, operation, repair, training and testing of the following equipment in accordance with Section C of the basic contract — aircraft elevators, weapons elevators, deck edge doors, hangar bay divisional doors, vertical package conveyors and associated handling equipment/systems.

Work related to this deal will be executed in Newport News, VA.

Aircraft Carriers & Huntington Ingalls

Huntington Ingalls Newport News unit is an expert in engineering, design and construction of U.S. Navy nuclear aircraft carriers (CVN). These are the largest ships in the U.S. Navy's fleet, with a displacement of over 90,000 tons. Newport News has designed and built the first next generation ship, Gerald R. Ford class (CVN 78) aircraft carriers, and more than 31 aircraft carriers for the U.S. Navy since 1933, including all 10 Nimitz class (CVN 68) aircraft carriers currently in service.

The unit continues to be the exclusive prime contractor for nuclear aircraft carrier RCOH, with Huntington Ingalls being the sole designer and builder of nuclear-powered aircraft carriers. It is currently performing the RCOH of USS George Washington (CVN 73) and USS John C. Stennis (CVN 74).

The aforementioned discussion reflects the solid position that Huntington Ingalls enjoys in the nuclear aircraft carrier market. The company witnesses a strong inflow of contracts involving the production, RCOH and related support for CVNs. The latest contract win is a bright example of that. 

Looking Ahead

Nations are strengthening their defense capabilities amid rising geopolitical tensions. In this context, demand for military ships, which boasts the features of next-generation technology-based warfare capabilities, has been gaining momentum. This is due to the system’s growing importance in military missions.

Per a report from Mordor Intelligence, the aircraft carrier ship market is projected to witness a CAGR of more than 2% during the 2023-2028 period. Such solid growth trends indicate ample growth opportunities for Huntington Ingalls, as it enjoys the lucrative position of a prominent aircraft carrier in this market.

A few defense primes that can gain from the expanding aircraft carrier market are General Dynamics GD, BAE Systems BAESY and Lockheed Martin LMT.

General Dynamics’ NASSCO-Norfolk, a consolidation of two great shipyards, is a Master Ship Repair contractor providing high-quality and cost-effective maintenance and modernization for the U.S. Navy. With facilities in Bremerton, WA, in the Pacific Northwest, its expertise encompasses experience in more than 450 ships, a Master Ship Repair Agreement contract, and the maintenance and repair of aircraft carriers from the Navy's amphibious fleet.

GD boasts a long-term earnings growth of 8.6%. The Zacks Consensus Estimate for General Dynamics’ 2023 sales indicates an improvement of 4.4% from 2022 reported figure.

BAE Systems designs and manufactures naval ships as well as state-of-the-art combat systems and equipment supporting those warships. The company played a key role in the design and construction of the Queen Elizabeth Class Aircraft Carriers, the largest warship in the United Kingdom. It also provides management and delivery of planned overseas support to Queen Elizabeth aircraft carrier.

BAESY boasts a long-term earnings growth of 13.7%. The Zacks Consensus Estimate for BAE Systems’ 2023 sales indicates an improvement of 25.4% from 2022 reported figure.

Lockheed’s Surface Electronic Warfare Improvement Program Block 2 systems are used to upgrade warships like aircraft carriers’ electronic warfare capabilities so warfighters can respond to evolving threats. The company also offers upgrade to the AN/SLQ-32 systems on U.S. aircraft carriers to determine if the electronic sensors of its potential foes are tracking the ship.

LMT boasts a long-term earnings growth of 6.9%. The company has an average four-quarter earnings surprise of 6.86%.

Price Performance

Shares of Huntington Ingalls have lost 8.6% in the past year compared with the industry’s 16% decline.

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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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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