Huntington Ingalls Wins USS Fitzgerald Repair Deal Worth $77M

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Huntington Ingalls Industries , Inc.'s HII Ingalls Shipbuilding unit recently secured a modification contract for carrying out emergent repair and restoration of USS Fitzgerald (DDG 62). The contract also provisions the company to provide additional collision repair, maintenance and modernization services to USS Fitzgerald.

The deal, valued at $77.6 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 is scheduled to be over by January 2020. Huntington Ingalls will utilize fiscal 2018 operations and maintenance (Navy) funds and fiscal 2017 other procurement (Navy) funds to complete the task.

USS Fitzgerald

USS Fitzgerald (DDG 62) is a guided missile destroyer battleship of 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. Its Ingalls Shipbuilding unit is the largest supplier of U.S. Navy surface combatants, and has built nearly 70% of the U.S. Navy fleet of warships.

Coming to recent developments in this unit, the company added some value additions to their product repertoire in the fourth quarter of 2017. It laid the foundation for LPD 28 Fort Lauderdale, DDG 123 and DDG 119 missile destroyer alongside delivering DDG 114 Ralph Johnson and launching the NSC 8 Midgett. Such development positions the company well ahead of its peers in terms of acquiring major shipbuilding contracts.

However, the Ingalls division witnessed a marginal dip of 0.5% in fourth-quarter revenues from the year-ago period. Currently, the company is maximizing efforts to improve revenues from the Legend-class National Security Cutter and surface combatant programs. The latest contract win is expected to provide impetus to the division's growth.

Recently, President Trump proposed the fiscal 2019 budget that strongly emphasized on rebuilding the U.S. military into a more capable, lethal, and geared up Joint Force. The proposed budget's major war fighting investments included spending plans of $18.3 billion on shipbuilding and increasing the end strength for the Navy Force. Such planned initiatives, if approved by the Senate, will open doors for shipbuilding giants like Huntington Ingalls to acquire more contracts, which in turn will boost its profit margin.

Price Performance

Shares of Huntington Ingalls have rallied about 22.1% in a year, compared with the broader industry 's 48.4%. The underperformance might have been owing to the intense competition that the company faces in the aerospace-defense space.

Zacks Rank & Other Stocks to Consider

Huntington Ingalls sports a Zacks Rank #1 (Strong Buy).

A few other top-ranked stocks in the same sector are Boeing Co. BA , Heico Corporation HEI and Spirit Aerosystems SPR , each of them flaunting a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here .

Boeing delivered an average positive earnings surprise of 20.69% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 27% to $14.05 in the last 90 days.

Heico Corp. has an average positive earnings surprise of 0.97% for the last four quarters. The Zacks Consensus Estimate for 2018 earnings rose by 9.5% to $2.08 in the last 90 days.

Spirit Aerosystems posted an average positive earnings surprise of 9.76% for the last four quarters. The Zacks Consensus Estimate for 2018 earnings rose by 15% to $6.30 in the last 90 days.

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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.

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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