Huntington Ingalls Wins $91M Deal To Repair Jet Carriers
Zacks Investment Research | May 20, 2018 11:03PM ET
Huntington Ingalls Industries, Inc.’s (NYSE:HII) business segment, Newport News, recently secured a contract for the accomplishment of repair, alteration, maintenance, and/or modernization requirements on Navy nuclear aircraft carriers. Work related to the deal is scheduled to be completed by October 2022.
Details of the Deal
Valued at $91 million, the contract was awarded by the Puget Sound Naval Shipyard and Intermediate Maintenance Facility. Per the terms, the aforementioned tasks will be carried out in Puget Sound Naval Shipyard and Intermediate Maintenance Facility (PSNS and IMF) supported locations. It will be executed by personnel who are uniquely trained, qualified, and authorized to perform nuclear carrier propulsion plant maintenance.
Moreover, under the agreement, the PSNS and IMF labor force will accomplish time critical propulsion plant and plant related work on nuclear-powered aircraft carriers scheduled for repair, alteration and/or modernization over the next five years. Notably, the nuclear propulsion plant related efforts include technical support, planning, maintenance, repairs, corrective measures, testing and performance evaluations, and modernization efforts.
Majority of the work related to this deal will be carried out in Bremerton, WA. Fiscal 2018 operations and maintenance (Navy) funds will be utilized to partially finance the contract.
Huntington Ingalls’ Expertise in Aircraft Carriers
Aircraft carriers are the largest ships in the U.S. Navy's fleet. Notably, Huntington Ingalls’ Newport News has designed and built more than 30 aircraft carriers for the U.S. Navy since 1933. These include all 10 Nimitz class (CVN 68) aircraft carriers currently in active service and the first ship of the next generation Gerald R. Ford class (CVN 78) aircraft carriers.
In 2017, the company delivered the U.S. Navy's newest carrier — USS Gerald R. Ford (CVN 78) — and continues to be the exclusive prime contractor for nuclear aircraft carrier refueling and complex overhaul (RCOH). It is currently performing the RCOH of USS George Washington (CVN 73). The aforementioned developments reflect the valued experience that Huntington Ingalls has in constructing nuclear aircraft carriers.
Our View
Huntington Ingalls is one of the largest military shipbuilders in the United States. Over 70% of the active Navy fleet consists of this company’s ships.
Also, this military shipbuilder’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. As a result, this division frequently secures shipbuilding related contracts from the U.S. Navy and the country’s foreign allies. In the first quarter of 2018, this segment witnessed more than 11% sales improvement owing to higher revenues in naval nuclear support services and aircraft carriers.
Considering this division’s proven expertise in delivering top-notch aircraft carriers to the U.S. Navy, we may expect the company to go on winning contracts like the latest one. This, in turn, is likely to enable the Newport News division to deliver solid top-line result in quarters ahead.
The U.S. budget proposal for fiscal 2019 includes incremental funding for nuclear aircraft carriers, CVN-79 and CVN-80. For CVN-78, the financial plan aims at spending $1.8 billion.
Moreover, the fiscal 2019 baseline budget submission of $179.1 billion for the Department of the Navy reflects an increase of 4% from the fiscal 2018 budget request. Such impressive budget plan further strengthens growth prospect for shipbuilders like Huntington Ingalls.
Price Performance
In a year’s time, shares of Huntington Ingalls have rallied about 13.1% compared with the broader Original post
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