The Austal Limited (ASX: ASB) share price has opened flat on the ASX this morning after the company announced that it has been awarded a new $369 million contract by the U.S. Navy.
What are the details of the contract?
The contract relates to two additional Expeditionary Fast Transport Ships (EPF) commissioned by the U.S. Navy which extends the EPF program to 2022, with contraction of EPF 13 to commence in late 2019 and EPF 14 in mid-2020.
The 14-ship EPF program has been worth over US$2 billion and management said it believes this has underscored the ability of Austal USA to build highly capable ships at an affordable cost.
The contract is yet another boost for the shipbuilder and global defence prime contractor which has seen its share price climb 26% higher in the 12 months and 18% in this year alone.
How does Austal stack up against its peers?
Among the other large engineering contractors and construction groups, Emeco Holdings Ltd (ASX: EHL) is probably its closest peer in the Industrials sector while the dual-listed Civmec Holdings Ltd (ASX: CVL) is the most comparable in terms of operations.
The Emeco share price is down 2% this year following a weaker than expected reporting season but is quite pricey with a 42x earnings P/E multiple. It's been a similar story for the $213 million Civmec, which has seen its share price steadily decline over the last 3 months despite signing several big contracts including Perth Stadium and BHP's South Flank.
Is Austal in the buy zone?
In short – no. While today's announcement is a big boost and Austal certainly seems like the pick of the ASX engineering and construction stocks at the moment, I'd be holding off until there's some evidence of accretive earnings from some of these big projects.
For those who are impatient and want additional growth in 2019, I'd suggest checking out this buy-rated stock that is well-placed to capitalise on a $22 billion opportunity.
