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Huntington Ingalls (HII) Q2 Earnings: What's in Store?
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Huntington Ingalls Industries, Inc. (HII - Free Report) , the largest American shipbuilder, is set to release second-quarter 2016 results on Aug 4, before the opening bell. In the preceding quarter, the company had delivered a positive earnings surprise of 36.02%. Let’s see how things are shaping up for this announcement.
The largest military shipbuilder in the U.S., Huntington Ingalls is the prime industrial employer in Virginia. Huntington Ingalls is the sole designer and manufacturer of nuclear powered aircraft carriers in the U.S. Over 70% of the active U.S. Navy fleet consists of Huntington Ingalls ships.
The shipbuilding business outlook remains strong given the enacted fiscal 2016 budget and the fiscal 2017 proposal. Huntington Ingalls’ shipbuilding programs that were funded by the enacted 2016 budget comprised the construction of LPD-28 and the 9th National Security Cutter as well as accelerated development of LX(R) by two years. This may have a positive bearing on the company’s second-quarter results.
Among the important highlights during the quarter, the company’s Ingalls Shipbuilding division was selected to build the U.S. Navy’s next large-deck amphibious assault warship, LHA 8. The contract includes options that, if exercised, would bring the total contract value to $3.1 billion. The company has also won a $152 million contract from the U.S. Navy for advance planning of the detail design and production of the fiscal 2018 nuclear powered aircraft carrier, USS Enterprise (CVN 80).
Again, its Newport News Industrial (NNI) subsidiary continued its partnership with Westinghouse Electric Company for the construction of a domestic nuclear power plant in Georgia and South Carolina. The company will also act as a supply partner for Westinghouse for international prospects.
However, Huntington Ingalls derives its revenues primarily from the U.S. government. Hence, the company’s limited commercial exposure and almost full government dependency may prove fatal in maintaining its margins and bottom line.
The Zacks Consensus Estimate for the second quarter is pegged at $2.31 a share, reflecting a decrease of 2.19% year over year. The Zacks Consensus Estimate for revenues is at $1.72 billion, implying a 1.22% year over year decline.
Earnings Whispers?
Our proven model does not conclusively show that Huntington Ingalls is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.
Earnings ESP: Huntington Ingalls has an earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $2.31.
Zacks Rank: Huntington Ingalls has a Zacks Rank #1 which increases the predictive power of the ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.
Please note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Peer Releases
Lockheed Martin Corp. (LMT - Free Report) reported second-quarter 2016 earnings of $3.32 per share, surpassing the Zacks Consensus Estimate of $2.92 by 13.7%. Earnings also increased 12.9% from the year-ago level.
Northrop Grumman (NOC - Free Report) reported second-quarter 2016 adjusted earnings of $2.60 per share, beating the Zacks Consensus Estimate of $2.50 by 4%. Earnings also rose 5.3% from $2.47 earned in the year-ago quarter.
General Dynamics Corporation (GD - Free Report) announced second-quarter 2016 earnings from continuing operations of $2.44 per share, beating the Zacks Consensus Estimate of $2.30 by 6.1%.
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Huntington Ingalls (HII) Q2 Earnings: What's in Store?
Huntington Ingalls Industries, Inc. (HII - Free Report) , the largest American shipbuilder, is set to release second-quarter 2016 results on Aug 4, before the opening bell. In the preceding quarter, the company had delivered a positive earnings surprise of 36.02%. Let’s see how things are shaping up for this announcement.
HUNTINGTON INGL Price and EPS Surprise
HUNTINGTON INGL Price and EPS Surprise | HUNTINGTON INGL Quote
Factors at Play
The largest military shipbuilder in the U.S., Huntington Ingalls is the prime industrial employer in Virginia. Huntington Ingalls is the sole designer and manufacturer of nuclear powered aircraft carriers in the U.S. Over 70% of the active U.S. Navy fleet consists of Huntington Ingalls ships.
The shipbuilding business outlook remains strong given the enacted fiscal 2016 budget and the fiscal 2017 proposal. Huntington Ingalls’ shipbuilding programs that were funded by the enacted 2016 budget comprised the construction of LPD-28 and the 9th National Security Cutter as well as accelerated development of LX(R) by two years. This may have a positive bearing on the company’s second-quarter results.
Among the important highlights during the quarter, the company’s Ingalls Shipbuilding division was selected to build the U.S. Navy’s next large-deck amphibious assault warship, LHA 8. The contract includes options that, if exercised, would bring the total contract value to $3.1 billion. The company has also won a $152 million contract from the U.S. Navy for advance planning of the detail design and production of the fiscal 2018 nuclear powered aircraft carrier, USS Enterprise (CVN 80).
Again, its Newport News Industrial (NNI) subsidiary continued its partnership with Westinghouse Electric Company for the construction of a domestic nuclear power plant in Georgia and South Carolina. The company will also act as a supply partner for Westinghouse for international prospects.
However, Huntington Ingalls derives its revenues primarily from the U.S. government. Hence, the company’s limited commercial exposure and almost full government dependency may prove fatal in maintaining its margins and bottom line.
The Zacks Consensus Estimate for the second quarter is pegged at $2.31 a share, reflecting a decrease of 2.19% year over year. The Zacks Consensus Estimate for revenues is at $1.72 billion, implying a 1.22% year over year decline.
Earnings Whispers?
Our proven model does not conclusively show that Huntington Ingalls is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.
Earnings ESP: Huntington Ingalls has an earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $2.31.
Zacks Rank: Huntington Ingalls has a Zacks Rank #1 which increases the predictive power of the ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.
Please note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Peer Releases
Lockheed Martin Corp. (LMT - Free Report) reported second-quarter 2016 earnings of $3.32 per share, surpassing the Zacks Consensus Estimate of $2.92 by 13.7%. Earnings also increased 12.9% from the year-ago level.
Northrop Grumman (NOC - Free Report) reported second-quarter 2016 adjusted earnings of $2.60 per share, beating the Zacks Consensus Estimate of $2.50 by 4%. Earnings also rose 5.3% from $2.47 earned in the year-ago quarter.
General Dynamics Corporation (GD - Free Report) announced second-quarter 2016 earnings from continuing operations of $2.44 per share, beating the Zacks Consensus Estimate of $2.30 by 6.1%.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>