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Huntington Ingalls (HII) Wins Contract to Aid Submarine Program
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Huntington Ingalls Industries Inc.’s (HII - Free Report) Newport News Shipbuilding (“NSS”) unit recently clinched a modification contract to support submarine programs. The award has been offered by the Naval Sea Systems Command, Washington, D.C.
Details of the Deal
Valued at $27.4 million, the contract is projected to be completed by June 2025. Per the terms of the deal, Huntington Ingalls will conduct research and development of advanced submarine technologies to support current and future submarine platforms.
Work related to this deal will be executed in Newport News, VA.
What’s Favoring Huntington Ingalls?
Rising geopolitical tensions across the globe, particularly in regions like the South China Sea, the Arctic, and the Eastern Mediterranean, have prompted nations to strengthen their sea warfare capabilities. To this end, it is imperative to mention that submarines play a crucial role in strategic deterrence when it comes to defending a nation’s maritime boundary. Therefore, as nations are increasingly investing in submarines to tackle potential maritime threats, contracts to manufacture and modernize submarines are pouring in. The latest contract win is a bright example of that.
Such rising demand for combat submarines has been immensely benefiting Huntington Ingalls, which is a prominent manufacturer in the global submarine map and one of the two biggest U.S. submarine builders.
Notably, as of Dec 31, 2023, HII’s Newport News had delivered 63 submarines to the U.S. Navy (since 1960), including 49 fast attack and 14 ballistic missile submarines. This reflects the solid demand that HII’s submarine programs enjoy in the U.S. defense space that can be further gauged from the latest contract win.
Growth Prospects
Technological advancements in stealth, endurance and agility, as well as integration of new technologies like advanced sonar systems, along with aging submarine fleets, amid growing cross-border conflicts, are significantly boosting the demand for new-age submarines, as nations are increasingly investing in strengthening their maritime assets.
This must have prompted the Global Markets Insight firm to predict that the global submarine combat system market will witness a CAGR of 7% during 2020-2026. Such notable market growth prospects should benefit Huntington Ingalls, with submarines constituting 36% of its NSS unit’s top line during the first quarter of 2024.
Looking ahead, to reap the benefits of the aforementioned market’s growth, the company is also making notable efforts. Evidently, in January 2024, Huntington Ingalls delivered the first Columbia-class ballistic missile submarine stern, indicating a milestone in the ramp-up of Columbia-class module production by the NNS unit. Considering the fact that the Columbia class is set to replace the fleet of Ohio-class ballistic missile submarines and take over the role of the United States’ sea-based strategic deterrent, Huntington Ingalls may secure contracts in the near future to build more sterns for the Columbia class submarines, thereby boosting its revenue generation prospects.
Opportunities for Peers
HII apart, other prominent defense players that are expected to gain from the expanding submarine combat systems market are mentioned below:
General Dynamics (GD - Free Report) : Its Electric Boat business unit is one of the two primary contractors of both Columbia-class ballistic missile submarines and Virginia-class attack submarines, HII being the other one. This unit also provides submarine maintenance and modernization services in a variety of U.S. locations.
GD boasts a long-term (three to five years) growth rate of 12%. The Zacks Consensus Estimate for GD’s 2024 sales indicates growth of 10.5% from the 2023 level.
Northrop Grumman (NOC - Free Report) : It is the premier provider of missile launch systems for naval submarines and surface ships. Northrop is the manufacturer of every vertical launch system on U.S. Navy submarines.
NOC boasts a long-term earnings growth rate of 8.7%. The Zacks Consensus Estimate for NOC’s 2024 sales indicates growth of 4.6% from the 2023 level.
BAE Systems (BAESY - Free Report) : Its Astute class is the largest and most advanced attack submarine for the U.K. Royal Navy, which can strike targets up to 1,000 kilometers from the coast with pinpoint accuracy. Its Dreadnought Class submarine is currently under construction.
BAESY boasts a long-term earnings growth rate of 11.9%. The Zacks Consensus Estimate for 2024 sales indicates growth of 34.6% from the year-earlier level.
Price Performance
In the past year, shares of Huntington Ingalls have risen 7.7% against the industry’s 11.5% decline.
Image: Bigstock
Huntington Ingalls (HII) Wins Contract to Aid Submarine Program
Huntington Ingalls Industries Inc.’s (HII - Free Report) Newport News Shipbuilding (“NSS”) unit recently clinched a modification contract to support submarine programs. The award has been offered by the Naval Sea Systems Command, Washington, D.C.
Details of the Deal
Valued at $27.4 million, the contract is projected to be completed by June 2025. Per the terms of the deal, Huntington Ingalls will conduct research and development of advanced submarine technologies to support current and future submarine platforms.
Work related to this deal will be executed in Newport News, VA.
What’s Favoring Huntington Ingalls?
Rising geopolitical tensions across the globe, particularly in regions like the South China Sea, the Arctic, and the Eastern Mediterranean, have prompted nations to strengthen their sea warfare capabilities. To this end, it is imperative to mention that submarines play a crucial role in strategic deterrence when it comes to defending a nation’s maritime boundary. Therefore, as nations are increasingly investing in submarines to tackle potential maritime threats, contracts to manufacture and modernize submarines are pouring in. The latest contract win is a bright example of that.
Such rising demand for combat submarines has been immensely benefiting Huntington Ingalls, which is a prominent manufacturer in the global submarine map and one of the two biggest U.S. submarine builders.
Notably, as of Dec 31, 2023, HII’s Newport News had delivered 63 submarines to the U.S. Navy (since 1960), including 49 fast attack and 14 ballistic missile submarines. This reflects the solid demand that HII’s submarine programs enjoy in the U.S. defense space that can be further gauged from the latest contract win.
Growth Prospects
Technological advancements in stealth, endurance and agility, as well as integration of new technologies like advanced sonar systems, along with aging submarine fleets, amid growing cross-border conflicts, are significantly boosting the demand for new-age submarines, as nations are increasingly investing in strengthening their maritime assets.
This must have prompted the Global Markets Insight firm to predict that the global submarine combat system market will witness a CAGR of 7% during 2020-2026. Such notable market growth prospects should benefit Huntington Ingalls, with submarines constituting 36% of its NSS unit’s top line during the first quarter of 2024.
Looking ahead, to reap the benefits of the aforementioned market’s growth, the company is also making notable efforts. Evidently, in January 2024, Huntington Ingalls delivered the first Columbia-class ballistic missile submarine stern, indicating a milestone in the ramp-up of Columbia-class module production by the NNS unit. Considering the fact that the Columbia class is set to replace the fleet of Ohio-class ballistic missile submarines and take over the role of the United States’ sea-based strategic deterrent, Huntington Ingalls may secure contracts in the near future to build more sterns for the Columbia class submarines, thereby boosting its revenue generation prospects.
Opportunities for Peers
HII apart, other prominent defense players that are expected to gain from the expanding submarine combat systems market are mentioned below:
General Dynamics (GD - Free Report) : Its Electric Boat business unit is one of the two primary contractors of both Columbia-class ballistic missile submarines and Virginia-class attack submarines, HII being the other one. This unit also provides submarine maintenance and modernization services in a variety of U.S. locations.
GD boasts a long-term (three to five years) growth rate of 12%. The Zacks Consensus Estimate for GD’s 2024 sales indicates growth of 10.5% from the 2023 level.
Northrop Grumman (NOC - Free Report) : It is the premier provider of missile launch systems for naval submarines and surface ships. Northrop is the manufacturer of every vertical launch system on U.S. Navy submarines.
NOC boasts a long-term earnings growth rate of 8.7%. The Zacks Consensus Estimate for NOC’s 2024 sales indicates growth of 4.6% from the 2023 level.
BAE Systems (BAESY - Free Report) : Its Astute class is the largest and most advanced attack submarine for the U.K. Royal Navy, which can strike targets up to 1,000 kilometers from the coast with pinpoint accuracy. Its Dreadnought Class submarine is currently under construction.
BAESY boasts a long-term earnings growth rate of 11.9%. The Zacks Consensus Estimate for 2024 sales indicates growth of 34.6% from the year-earlier level.
Price Performance
In the past year, shares of Huntington Ingalls have risen 7.7% against the industry’s 11.5% decline.
Image Source: Zacks Investment Research
Zacks Rank
Huntington Ingalls currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.