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Huntington Ingalls (HII) Wins $240M Deal to Build LPD 32

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Huntington Ingalls Industries, Inc.’s HII business segment, Ingalls Shipbuilding, recently clinched a modification contract involving landing platform dock (“LPD”) 32. The Naval Sea Systems Command Washington, D.C., has offered the award.

Details of the Deal

Valued at $240 million, the contract is projected to be completed by December 2024. Per the terms, Ingalls Shipbuilding will provide long-lead-time material and perform detailed design and construction of LPD 32.

This contract modification includes options, which, if exercised, would bring its cumulative value  to $1.56 billion. On exercising these options, work for this contract will continue through March 2031.

A major portion of the work related to this deal will be carried out in Pascagoula, MS.

LPDs and Huntington Ingalls

LPDs, also known as amphibious transport dock ships, are designed to deliver equipment and supplies ashore to the U.S. Navy, using air cushion or conventional landing craft and amphibious assault vehicles. These, in turn, are supported by helicopters or vertical takeoff and landing aircraft such as the MV-22 Osprey.

These ships aim at supporting amphibious assault, special operations, expeditionary warfare and humanitarian missions. For Huntington, LPD is a long-running production program of expeditionary warfare ships in which the company has generated efficiencies through ship-over-ship learning.

The San Antonio class (LPD 17) is the newest addition to the U.S. Navy's 21st-century amphibious assault force, and these ships are crucial to the U.S. Navy's sea-base transformation. In 2022, Huntington Ingalls delivered Fort Lauderdale (LPD 28). The company is currently constructing Richard M. McCool Jr. (LPD 29) and Harrisburg (LPD 30).

Considering such developments, the latest contract involving the construction of yet another LPD indicates the solid demand that Huntington Ingalls enjoys in the naval warfare market.

Looking Ahead

Per the latest report by Mordor Intelligence, the global naval vessels market’s worth is expected to increase $253 billion during the 2022-2031 period at a CAGR of 12.8%. This, in turn, should boost the growth of various assault ships, including LPDs. Huntington Ingalls, being a major shipbuilding giant, is likely to benefit.

Other major combat shipbuilding companies across the globe like General Dynamics GD, Bae Systems BAESY and Mitsubishi Heavy Industries MHVYF should also benefit from such market projections.

General Dynamics has been serving the U.S. Navy by constructing and delivering next-generation combat ships for decades. The company is a co-contractor with Huntington Ingalls for the construction of many assault ships.

General Dynamics boasts a long-term earnings growth rate of 9.8%. The Zacks Consensus Estimate for 2022 sales implies an improvement of 2.7% from the 2021 reported figure.

Bae Systems designs and manufactures naval ships and submarines, along with their state-of-the-art combat systems and equipment. It also offers an array of associated services, including training solutions, maintenance and modernization programs to support ships and equipment in service around the world.

BAE Systems boasts a long-term earnings growth rate of 7.2%.  The Zacks Consensus Estimate for 2022 sales indicates an improvement of 25.5% from the 2021 reported figure.

Mitsubishi Heavy Industries manufactures naval surface ships as well as submarines. The company also provides after-sales service for destroyers and submarines.

Mitsubishi Heavy Industries delivered an earnings surprise of 7.24% in the last reported quarter. The Zacks Consensus Estimate for fiscal 2023 sales suggests an improvement of 5% from the 2021 reported figure.

Price Movement

In a year’s time, shares of Huntington Ingalls have lost 5.8% compared with the industry’s 44.5% decline.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Zacks Rank

Huntington Ingalls currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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