Huntington Ingalls Industries, Inc. (HII Quick QuoteHII - Free Report) is set to release first-quarter 2017 results on May 4, before the opening bell.

Last quarter, the company posted an earnings surprise of 47.98%. Moreover, the company surpassed the Zacks Consensus Estimate in three of the past four quarters, with an average earnings surprise of 19.85%.

Let’s see how things are shaping up at the company prior to this announcement.

Factors at Play

Being the U.S.’ largest military shipbuilder, Huntington Ingalls' ships comprise more than 70% of the nation’s active Navy fleet. The company’s strong cash generating capacity enables it to follow a disciplined investment strategy.

Coming to first-quarter expectations, the company’s CVN 72 Lincoln aircraft carrier fleet is currently undergoing refueling and complex overhaul process, projected to be complete by the first half of 2017. We can expect further updates on this process once Huntington Ingalls releases its first-quarter results.

At the end of fourth-quarter 2016, the company completed its acquisition of Camber Corporation, a government services company based in Huntsville, AL, for $380 million. We expect Huntington Ingalls’ Technical Solutions segment to reflect a positive impact of this buyout in the yet-to-be-reported quarter’s results.

On the flip side, we notice that Huntington Ingalls failed to clinch any notable contract from the Department of Defense (DoD) this quarter, opposed to a handful of defense deals it usually secures in other quarters. This might weigh down on its first-quarter revenue growth. 

The Zacks Consensus Estimate for first-quarter earnings is pegged at $2.72, reflecting a 5.31% decline year over year. The Zacks Consensus Estimate for revenues is $1.82 billion, implying a 2.95% improvement.

Earnings Whispers

Our proven model does not conclusively show an earnings beat Huntington Ingalls is likely to beat earnings 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. This is not the case here, as you will see below.

Zacks 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 $2.72. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Huntington Ingalls carries a Zacks Rank #2, which increases the predictive power of ESP. However, the company’s Earnings ESP of 0.00% makes surprise prediction difficult.

Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrant a Look

Here are a few stocks in the Aerospace-Defense space worth considering on the basis of our model which shows that they have the right combination to pull off a beat:

Orbital ATK, Inc. is expected to report first-quarter 2017 results on May 4. The company has an Earnings ESP of +2.22% and a Zacks Rank #3.

Leidos Holdings, Inc. (LDOS Quick QuoteLDOS - Free Report) has an Earnings ESP of +1.28% and a Zacks Rank #3. The company is expected to report first-quarter results on May 4. You can see the complete list of today’s Zacks #1 Rank stocks here.

Engility Holdings, Inc. is scheduled to report first-quarter 2017 results on May 4. The company has an Earnings ESP of +2.50% and a Zacks Rank #3.

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