The Austal Ltd (ASX: ASB) share price is sailing at full steam ahead today, up 25.4%.

Shares in the ASX shipbuilder closed yesterday trading for $1.60. At the time of writing, Austal shares are changing hands for $2.00 apiece.

This follows the company’s announcement this morning of a contract potentially worth $4.8 billion.

What did the ASX shipbuilder report?

The Austal share price is flying higher after the company reported the United States Navy has awarded Austal USA some lucrative contracts.

Those comprise a US$113.9 million fixed-price incentive (firm target) and firm-fixed-price contract for detail design of the Auxiliary General Ocean Surveillance Ship T-AGOS 25 Class.

According to the release, the contract includes options for detail design and construction of up to seven T-AGOS 25 Class ships.

Helping lift the Austal share price today is the company’s report that if that option is exercised, the cumulative value of the contract comes to US$3.2 billion (AU$4.8 billion).

The 110m steel-hulled T-AGOS ships support anti-submarine missions for the US Atlantic and Pacific Fleets by providing a platform capable of passive and active anti-submarine acoustic surveillance.

Management commentary

Commenting on the contract sending the Austal share price up today, CEO Paddy Gregg said Austal USA was “honoured to be selected to deliver this critical capability for the Navy”.

Gregg said the contract would take advantage of the company’s “advanced manufacturing processes, state-of-the-art steel shipbuilding facilities”, and growing team of shipbuilders.

He added:

The T-AGOS contract is a clear acknowledgment of Austal’s capabilities in steel naval shipbuilding, that includes the Navy’s Towing, Salvage and Rescue (T-ATS) ships, an Auxiliary Floating Drydock Medium (AFDM), and the US Coast Guards’ Offshore Patrol Cutters.

Gregg said these four steel naval shipbuilding projects were “positioning Austal USA exceptionally well to meet the growing demands of the US Navy and Coast Guard”.

Austal share price snapshot

With today’s big intraday boost factored in, the Austal share price is back in the green over the full year, up 2.4%.

The post Why the Austal share price is sailing 25% higher today appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Austal. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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