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Huntington Ingalls (HII) Wins $3B Navy Contract for LHA 8


Huntington Ingalls Industries, Inc. HII has clinched a modification contract from the U.S. Navy to procure the detail, design, and construction of the Landing Helicopter Assault (LHA) Replacement (LHA(R)) Flight 1 Amphibious Assault Ship (LHA 8). The contract is valued at $3 billion.

Work is scheduled to be completed by Jan 2024. Majority of the work will be performed in Pascagoula, MI, while the rest will be executed in various other locations in the U.S. It will use fiscal 2016 and 2017 shipbuilding and conversion (Navy) funds.

About the Amphibious Assault Ship & LHA

The amphibious assault ship is a kind of commando carrier used to land and support ground forces on enemy territory. These ships were developed by transforming aircraft carriers into helicopter carriers and they incorporate support for amphibious landing craft.

The largest fleet of such ships is operated by the U.S. Navy, which specifically includes large-deck amphibious ships such as the Landing Platform Helicopter (LPH), Landing Helicopter Assault (LHA), and Landing Helicopter Dock (LHD).

LHA is the hull classification symbol of the Navy for the Tarawa and America classes of normal helicopter-carrying amphibious assault ships. These ships transport Fleet Marine Force personnel and equipment, while operating in a deployed Marine Expeditionary Unit.

Huntington Ingalls – A Key Defense Operator

Huntington Ingalls is the prime industrial employer in Virginia. Notably, over 70% of the active Navy fleet comprises Huntington Ingalls ships. Its Ingalls Shipbuilding segment is the sole manufacturer of amphibious assault ships for the Navy.

Huntington Ingalls is the only builder of National Security Cutters ("NSCs") for the U.S. Coast Guard and one of only two companies that build the DDG-51 Arleigh Burke-class destroyers. The other producer of these destroyers is General Dynamics Corp. GD.

We expect the growth momentum for Huntington Ingalls to continue in the days ahead, given the recent positive budget revision. 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.

Price Movement

Shares of Huntington Ingalls have rallied 15.7% in the last one year, underperforming the Zacks categorized Aerospace-Defense industry’s gain of 26.8%. This could be because the earlier budget cuts have put pressure on the top line. We believe that budget deficits and political uncertainty might make future defense budgets vulnerable to cutbacks. As a result, the company's performance lagged behind the likes of The Boeing Co. BA and Airbus Group SE EADSY, which have outperformed the industry.

Zacks Rank

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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