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Huntington Ingalls (HII) Q4 Earnings Miss, Revenues Rise Y/Y

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Huntington Ingalls Industries, Inc.’s (HII - Free Report) fourth-quarter 2020 adjusted earnings of $4.35 per share missed the Zacks Consensus Estimate of $4.49 by 3.1%. Moreover, the bottom line improved 47% from $2.96 reported in the prior-year quarter.

The company reported GAAP earnings of $6.15 per share compared with $3.61 recorded in the fourth quarter of 2019.

For 2020, the company reported adjusted earnings of $10 per share, which missed the Zacks Consensus Estimate of $15.47. The full-year earnings figure also came in lower than the year-ago reported figure of $10.66.

Total Revenues

Total revenues came in at $2,757 million, exceeding the Zacks Consensus Estimate of $2,466 million by 11.8%. The top line also improved 14.3% from $2,412 million in the year-ago quarter. The increase was driven by growth in both Newport News and Ingalls Shipbuilding divisions.

 

For 2020, the company recorded revenues worth $9.36 billion, which exceeded the Zacks Consensus Estimate of $9.07 billion. Full-year revenues also came in higher than $8.90 billion recorded in 2019.

Operational Performance

Huntington Ingalls reported total operating income of $305 million compared with operating income of $186 million in the fourth quarter of 2019. The company’s operating margin came in at 11.1%, up 335 basis points (bps) from the prior-year quarter.

Huntington Ingalls received orders worth $3.5 billion during the fourth quarter. As a result, the company’s total backlog reached $46 billion as of Dec 31, 2020.

Segmental Performance

Newport News Shipbuilding: Revenues totaled $1,750 million in this segment, up 25.1% year over year on account of higher revenues in submarine and aircraft carrier construction. Higher revenues from refueling and complex overhaul (RCOH) also contributed to this unit’s revenue growth in the fourth quarter.

Meanwhile, the segment reported operating earnings of $128 million in the quarter, which declined 6.6% year over year. The segment’s operating margin contracted 248 bps to 7.3%.

Ingalls Shipbuilding: Revenues in this segment totaled $752 million, up 7.1% year over year by higher revenues in surface combatants and amphibious assault ships.

Also, operating income improved 62.7% year over year to $96 million while operating margin expanded bps to 12.8%.

Technical Solutions: Revenues in this segment totaled $311 million, down 11.1% year over year on account of lower revenues at the oil and gas reporting unit, as well as lower revenues at the San Diego Shipyard due to the conclusion of several repair contracts.

However, operating income improved to $18 million against operating expenses of $23 million incurred in  fourth-quarter 2019. The unit’s operating margin improved to 5.8%.

Financial Update

Cash and cash equivalents as of Dec 31, 2020 were $512 million, significantly up from $75 million as of Dec 31, 2019.

Long-term debt as of Dec 31, 2020 was $1,686 million compared with the 2019-end level of $1,286 million.

Cash from operating activities at the end of 2020 grossed $1,093 million, up from the previous year’s $896 million.

2021 Outlook

The company currently expects to generate revenues worth $8.2-$8.4 billion from its Shipbuilding business in 2021 and approximately $1 billion from technical solutions.

Huntington Ingalls also projects to generate free cash flow in the range of $150-$250 million.

Zacks Rank

Huntington Ingalls carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recent Defense Releases

Lockheed Martin Corp. (LMT - Free Report) reported fourth-quarter 2020 earnings from continuing operations of $6.38 per share, which came in line with the Zacks Consensus Estimate.

Hexcel Corporation (HXL - Free Report) reported fourth-quarter 2020 loss of 18 cents per share, in line with the Zacks Consensus Estimate.

General Dynamics Corporation (GD - Free Report) reported fourth-quarter 2020 earnings from continuing operations of $3.49 per share, which missed the Zacks Consensus Estimate of $3.55 by 1.7%.

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