Shares of 3D Systems (NYSE:DDD), a global leader in additive manufacturing, climbed 23% in May, according to data from S&P Global Market Intelligence. Shareholders celebrated news of a deal with the nation's largest military shipbuilder, effectively reversing the slide the stock had experienced following the company's release of its less-than-encouraging Q1 2018 earnings report.
Announcing an agreement with Huntington Ingalls Industries' Newport News Shipbuilding division, 3D Systems revealed that it will now provide metal additive manufacturing solutions to assist in the construction of naval vessels.
According to 3D Systems' press release, Newport News will use "the ProX DMP 320 – designed for precision metal 3D printing-to produce marine-based alloy replacement parts for castings as well as valves, housings and brackets-for future nuclear-powered warships."
Understandably, shareholders rejoiced at the deal with Huntington Ingalls, for it provides 3D Systems with a unique foothold in the defense industry. In addition to being solely responsible for the design and construction of the U.S. Navy's nuclear-powered aircraft carriers, Newport News Shipbuilding is one of only two companies that design and build nuclear-powered submarines for the Navy.
A successful collaboration between 3D Systems and Newport News Shipbuilders may open the door to further opportunities with Huntington Ingalls, which builds the Coast Guard's flagship, National Security Cutter, and the San Antonio (LPD 17) class of amphibious transport dock ships for the U.S. Navy. And it may portend opportunities for its metal 3D printing solutions beyond the defense industry as 3D Systems may garner interest from other maritime-oriented businesses -- like those dealing in containerships.
Despite the market's bullish reaction to the deal with Newport News Shipbuilding, prospective investors should still exercise caution with 3D Systems. It will take some time to see how material of an impact this deal has on the company's financials and whether, in fact, it leads to increased opportunities in the maritime and defense industries.