Military shipbuilder, Huntington Ingalls Industries, Inc .'s HII unit, Newport News, has clinched a modification contract to support the advance planning of the refuelling complex overhaul of USS George Washington (CVN73). Work for this deal will be over by Aug 2017.
Valued at $9.7 million, the contract was awarded by the Naval Sea Systems Command, Washington, D.C. Per the modification, Huntington will provide additional supplemental material for the work, to be carried out in Newport News, VA. The company will utilize fiscal 2016 shipbuilding and conversion (Navy) funds to complete the deal.
A Brief Note on USS George Washington
USS George Washington is the sixth ship in the Nimitz-class aircraft carriers and the fourth U.S. Navy ship to be named after George Washington, the country's first president. Notably, the Nimitz-class aircraft carriers are the largest nuclear-powered warships that can accommodate up to 6000 personnel on board.
The latest models of this family of fleet, including CVN 73, come with a length of 317m and can reach to a maximum speed of more than 30kt. These ships are equipped with Raytheon Company's RTN AN/SLQ-32(V) electronic warfare system that detects hostile radar emissions, providing a warning signal and interfaces to the ship's countermeasures systems.
Huntington is one of the largest military shipbuilders in the country. Over 70% of the active Navy fleet consists of Huntington ships. Notably, the company's Newport News division is the nation's sole designer, builder and refueler of nuclear-powered aircraft carriers. It also offers one of only two shipyards capable of designing and building nuclear-powered submarines.
However, this division has been lagging in performance for the past couple of quarters. In the first quarter of 2017, the segment witnessed more than 2% sales decline owing to lower sales volumes on submarines.
Nevertheless, we expect the company's overall growth momentum to continue in the days ahead, given the recent positive budget revision done by the 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.
Shares of Huntington Ingalls have rallied 11.7% in the last one year, underperforming the Zacks categorized Aerospace-Defense industry's gain of 28.5%. 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 the likes of The Boeing Company BA and General Dynamics Corp. GD that outperformed the industry.
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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