Huntington Secures a $5.8B Contract for Amphibious Transport Dock Ships
Huntington Ingalls Industries Inc. HII recently secured a $5.8 billion contract to design and construct three amphibious transport dock ships, LPD Flight II (LPD 33, LPD 34 and LPD 35). The award has been offered by the Naval Sea Systems Command, Washington, D.C.
The majority of work related to this contract will be executed in Pascagoula, MS. The project is expected to be completed by September 2035.
What’s Favoring HII?
With countries worldwide enhancing their defense capabilities, spending on advanced military arms and ammunition has been rapidly increasing. This also includes warships and dock ships, which are crucial for maritime missions. This trend has been benefiting HII in the form of a steady order flow from the U.S. Navy.
Notably, HII’s San Antonio class ships, otherwise known as landing platform dock (LPD), are the newest additions to the U.S. Navy’s amphibious assault fleet. These large ships, 684 feet long and 105 feet wide, are designed to transport Marines, equipment and supplies to shore using air cushions or regular landing craft as well as amphibious vehicles. They also work with helicopters and aircraft like the MV-22 Osprey for air support.
These ships can handle a variety of missions. They help marines with amphibious assaults, power projection and military operations. They are also used for humanitarian aid and disaster relief, making them versatile for different types of missions in the 21st century.
Such notable features of the aforementioned amphibious ships of HII are likely to have been boosting their demand, which is further evident from the latest contract win.
HII Stock’s Growth Prospects
With rising global geopolitical tensions, nations are rapidly augmenting their defense purchase to strengthen their warfare capabilities. This has led to an increased demand for defense products such as naval combat vessels, dock ships and support ships.
This is likely to have prompted Mordor Intelligence to forecast a compound annual growth rate of 6.5% for the global naval vessels market during the 2024-2029 time period.
This is likely to benefit HII, the largest military shipbuilding company in the United States, which also provides services to government and industry partners. For more than 100 years, the company’s shipbuilding divisions have built more types of ships than any other U.S. naval shipbuilder. Its Ingalls segment manufactures amphibious assault and expeditionary ships for the U.S. Navy while its Newport News division is the nation's sole designer, builder and refueler of nuclear-powered aircraft carriers.
Prospects of HII’s Peers
Other defense companies that are likely to enjoy the perks of the expanding naval vessels market have been discussed below.
General Dynamics Corporation GD: It 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.
The company’s long-term (three to five years) earnings growth rate is 12.6%. The Zacks Consensus Estimate for GD’s 2024 sales indicates year-over-year growth of 13.5%.
RTX Corporation RTX: Its defense segment produces advanced naval systems and technology, including radar, missile systems and sensors, which are critical for modern naval vessels, aligning it well with market growth.
The company’s long-term earnings growth rate is 10.4%. The Zacks Consensus Estimate for RTX’s 2024 sales indicates year-over-year growth of 7%.
Northrop Grumman Corporation NOC: It supplies advanced defense systems, including navigation, control and combat systems for naval vessels. As navies worldwide modernize their fleets, Northrop Grumman’s technologies are increasingly in demand.
The company’s long-term earnings growth rate is 8.7%. The Zacks Consensus Estimate for NOC’s 2024 sales indicates year-over-year growth of 5.4%.
HII Stock’s Price Movement
Shares of HII have gained 3.3% in the year-to-date period against the industry’s 3% decline.
Image Source: Zacks Investment Research
HII’s Zacks Rank
HII 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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