Huntington Ingalls Clinches Another Cutter Deal - Analyst Blog

Huntington Ingalls Industries' HII National Security Cutters NSC are in demand. The company through its Ingalls Shipbuilding division received a contract worth $497.0 million from the U.S. Coast Guard to build yet another NSC.

Per the contract, the company will construct the seventh Legend-class NSC. Huntington Ingalls expects to start the construction on this ship in Jan 2015.

The new cutters are built to replace the old 378-foot Hamilton class cutters. This new of class of ships is 418 feet long with a 54-foot beam and can shift 4,500 tons with a full load. These cutters can cover 12,000 miles, having a top speed of 28 knots.

Huntington Ingalls has already delivered three NSCs while three more are under construction. It expects to deliver all the NSCs, which are presently in various stages of construction by 2015. Huntington Ingalls expects to deliver the seventh cutter in 2018.

The demand for this class of ships is enabling Huntington Ingalls to build each ship more effectively and efficiently than the previous one. So, if Huntington Ingalls receives more orders for these cutters from the U.S. Navy, it will further drive economies of scale.

Huntington Ingalls, a Zacks Rank #1 (Strong Buy) stock, has been posting strong financial results, surpassing our estimates by 34.7% on an average in the last 4 quarters. This upside was driven by higher revenues from surface combatants and the Legend-class NSS program. However, surface combatants remained weak in the first and third quarters of 2013.

The robust fourth-quarter results have also inspired upward estimate revisions. For the first quarter of 2014, the Zacks Consensus Estimate increased by 13.4% to $1.61 per share while for 2014 the estimate increased by 13.0% to $7.03 per share over the last 30 days.

Other formidable players in the aerospace/defense sector worth considering include Wesco Aircraft Holdings, Inc. WAIR, Northrop Grumman Corp. NOC and Lockheed Martin Corp. LMT. While Wesco Aircraft holds a Zacks Rank #1 (Strong Buy), Northrop Grumman Corporation and Lockheed Martin carry a Zacks Rank #2 (Buy).