Shipbuilder Austal Limited (ASX: ASB) rallied to a near three-year high after it received funding from the US navy for the construction of two additional warships.
Shares in Austal jumped 1.7% to $1.80 during lunch time trade as management said the Littoral Combat Ship (LCS) contract will add $US691 million to its order book, which now totals $3.1 billion.
The news is particularly sweet given the weak outlook for the Australian dollar. The market is expecting the Reserve Bank of Australia to cut interest rates to a fresh record low of 2% next week followed by another rate cut in the coming months.
While Austal will benefit from translated earnings as it is paid in US dollars, it won't benefit on the cost side from the exchange rate as construction of the LCS will be undertaken at Austal's Alabama facility in the United States.
That may be just as well given recent news reports estimating that shipbuilding in Australia costs 30% more than elsewhere in the world.
The US navy has an option to order an additional LCS, which can be exercised in calendar 2016 and around three quarters of Austal revenue comes from the US, according to its latest accounts.
If the additional option is exercised, it would bring the total number of LCS built by Austal to 13, with the Australian shipbuilder acting as the main contractor on 11 of the 13 ships.
Austal is also building joint high speed vessels for the US navy under a $US1.6 billion contract.
But Austal isn't the only one poised to benefit from the weaker Aussie. As my colleague Ryan Newman wrote a few weeks ago, there are four other blue chips that are also expected to get an earnings boost from the stronger greenback.
These include shopping centre giant Westfield Corp Ltd (ASX: WFD), packaging company Amcor Limited (ASX: AMC), medical device maker ResMed Inc. (CHESS) (ASX: RMD) and investment bank Macquarie Group Ltd (ASX: MQG).