BAE Systems Secures a Contract to Support USS Forrest Sherman

BAE Systems Inc. BAESY recently clinched a modification contract to support the maintenance, modernization and repair of the USS Forrest Sherman (DDG 98). The contract covers all required labor, equipment, testing, facilities and quality assurance activities to execute the ship’s fiscal 2026 depot modernization period.

Valued at $117.7 million, the contract is expected to be completed in August 2027. The award has been provided by the Naval Sea Systems Command, Washington, D.C.

The majority of the work related to the contract will be carried out in Norfolk, VA.

Growth Prospects for BAESY

According to a report from the Mordor Intelligence firm, nations across the globe are fortifying their defense spending on military weapons and arsenals as they look to strengthen their defense capabilities. This also includes augmented spending on navy ships for enhanced sea warfare capabilities. Mordor Intelligence also forecasts that the naval vessels market will witness a compound annual growth rate of 6.46% during the 2025-2030 period.

Such increased spending tends to benefit BAE Systems as its Platforms & Services business manufactures and upgrades combat vehicles, weapons and munitions and provides naval ship repair.

Such features may have resulted in multiple contract wins for BAE Systems.

Opportunities for Other Defense Stocks

Some other defense players that can gain from the expanding naval vessel market are discussed below.

Lockheed Martin LMT: Lockheed’s Rotary and Mission Systems unit supports integrated warfare systems and sensors programs such as the AEGIS Combat System, the Littoral Combat Ship and Multi-Mission Surface Combatant for the U.S. Navy and other allies.

LMT’s long-term (three-to five-year) earnings growth rate is 11.9%. The Zacks Consensus Estimate for 2025 sales implies growth of 4.7% from the prior-year figure.

Huntington Ingalls Industries HII: Huntington Ingalls’ Ingalls Shipbuilding segment constructs amphibious assault ships, expeditionary warfare ships, surface combatants and national security cutters for the U.S. Navy and boasts a strong portfolio of products. The Newport News segment is involved in the design and construction of nuclear-powered aircraft carriers and submarines.

HII’s long-term earnings growth rate is 13.8%. The Zacks Consensus Estimate for 2025 sales implies growth of 4.7% from the prior-year figure.

General Dynamics GD: General Dynamics’ Marine Systems segment is the leading designer and builder of nuclear-powered submarines and a leader in surface combatant and auxiliary ship design and construction for the U.S. Navy.

GD’s long-term earnings growth rate is 13.1%. The Zacks Consensus Estimate for 2025 sales implies growth of 8.9% from the prior-year figure.

Price Performance

In the past year, shares of BAE Systems have gained 51.1% compared with the industry’s 21.3% growth.

Zacks Rank

BAE Systems currently has 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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This article originally published on Zacks Investment Research (zacks.com).

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