A month has gone by since the last earnings report for Huntington Ingalls (HII Quick QuoteHII - Free Report) . Shares have added about 10.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Huntington Ingalls due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Huntington Ingalls Q3 Earnings Beat, Revenues Up Y/Y

Huntington Ingalls’ third-quarter 2020 earnings of $5.45 per share surpassed the Zacks Consensus Estimate of $4.18 by 30.4%. Moreover, the bottom line improved 45.7% from $3.74 reported in the prior-year quarter.

Total Revenues

Total revenues came in at $2,314 million, exceeding the Zacks Consensus Estimate of $2,228 million by 3.9%. The top line also improved 4.3% from $2,219 million in the year-ago quarter. The increase was driven by growth in both Newport News and Ingalls Shipbuilding divisions.

Operational Performance

Huntington Ingalls reported total operating income of $222 million compared to the operating income of $1214 million in the third quarter of 2019. The increase in operating income was mainly the result of higher operating FAS/CAS adjustments.

Huntington Ingalls received orders worth $1.6 billion during the third quarter. As a result, the company’s total backlog reached $45.3 billion as of Sep 30, 2020.

Segmental Performance

Newport News Shipbuilding: Revenues totaled $1,358 million in this segment, up 6.6% year over year on account of higher revenues in submarine and

aircraft carrier construction as well as fleet support services.

Meanwhile, the segment reported operating earnings of $79 million in the quarter, which declined 34.7% year over year. The segment’s operating margin contracted 368 basis points (bps) to 5.6%.

Ingalls Shipbuilding: Revenues in this segment totaled $675 million, up 4.3% year over year on account of higher revenues of surface combatants and the Legend-class National Security Cutter (NSC) program.

Also, operating income improved 1.6% year over year to $62 million, while operating margin contracted 24 bps to 9.2%.

Technical Solutions: Revenues in this segment slipped 1.8% to $320 million on account of lower revenues from the San Diego Shipyard due to the conclusion of several repair contracts.

The segment’s operating income soared 133.3% year over year to $21 million, whereas operating margin expanded 380 bps to 6.6%.

Financial Update

Cash and cash equivalents as of Sep 30, 2020 were $744 million, significantly up from $75 million as of Dec 31, 2019.

Long-term debt as of Sep 30, 2020, was $2,278 million compared with the 2019-end level of $1,286 million.

Cash from operating activities at the end of third-quarter 2020 grossed $491 million, up from the previous year’s $330 million.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted -7.32% due to these changes.

VGM Scores

At this time, Huntington Ingalls has a great Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Huntington Ingalls has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.