Huntington Ingalls Industries Inc.’s HII business unit, Mission Technologies, recently won a $6.7 billion deal to provide electronic warfare engineering and technical services support for the U.S. Air Force. This is the largest contract ever given to HII's Mission Technologies division.

The market reacted positively to this news, with HII’s share price increasing by 1.4% from Dec. 5, the date of the announcement of the contract.

What’s Favoring HII Stock?

Rising geopolitical tensions globally have prompted countries to enhance their military capabilities, including electronic warfare (EW) systems, by increasing spending on the production and modernization of varied programs. The demand for the EW systems has been on the rise over the past decade driven by their ability to jam radar and communication systems of enemies, which protects aircraft from detection, ensuring safer air operations for strikes and reconnaissance missions.

The Mordor Intelligence firm predicts the Electronic Warfare market will witness a CAGR of 5.1% during the 2024-2029 period. This should create ample growth opportunities for advanced EW solution providers like HII, as it offers state-of-the-art EW solutions across multiple domains, including air, sea, land and cyber.

HII is well-positioned to support multi-domain operations by using its expertise in systems integration and cyber-electromagnetic activities, which combine EW with cyber and communications technology. This method improves the ability to identify and neutralize adversary systems across several battlefields, providing critical benefits in modern warfare. Such EW solutions must have been ushering in solid order flow for HII, like the latest one, which, in turn, should boost its future revenues.

Opportunities for Other Defense Stocks

Other defense contractors that are expected to reap the benefits of the expanding EW market are listed below:

L3Harris Technologies LHX: It manufactures electronic warfare systems like the AN/ALQ-214 (IDECM) F/A-18 Countermeasure System, Viper Shield AN/ALQ-254(V)1 All-digital Electronic Warfare Suite, CREW Vehicle Receiver/Jammer and The Next Generation Jammer-Low Band.

L3Harris has a long-term (three to five years) earnings growth rate of 9.2%. The Zacks Consensus Estimate for LHX’s 2024 sales suggests growth of 9.7% from the prior-year reported figure.

Lockheed Martin LMT: It provides global ground EW solutions to the U.S. forces as well as partner nations through a unique next-generation open architecture product platform and open business model. Its Advanced Off-Board Electronic Warfare program delivers persistent electronic surveillance and attack capability against naval threats like anti-ship missiles.

Lockheed boasts a solid long-term earnings growth rate of 4.6%. The consensus estimate for LMT’s 2024 sales indicates a 5.5% improvement from the prior year's reported figure.

Northrop Grumman NOC: The company has been providing Naval Airborne Electronic Warfare solutions for more than 55 years. Some of its EW systems include the ALQ-251 radio frequency countermeasures system and the AN/APR-39 Radar Warning Receiver/Electronic Warfare Management System.

NOC boasts solid long-term earnings growth rate of 19.1%. The Zacks Consensus Estimate for its 2024 sales indicates year-over-year growth of 5.3%.

HII’s Stock Price Movement

In the past month, shares of HII have fallen 6.4% compared to the industry’s decline of 4.8%.

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HII’s Zacks Rank

HII currently carries a Zacks Rank #5 (Strong Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Lockheed Martin Corporation (LMT) : Free Stock Analysis Report

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