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Huntington Ingalls (HII) Q3 Earnings: A Beat in the Cards?
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Huntington Ingalls Industries, Inc. (HII - Free Report) , the largest U.S. military shipbuilder, is set to release third-quarter 2016 results on Nov 3, before the opening bell.
In the preceding quarter, the company posted a positive earnings surprise of 0.43%. Moreover, Huntington beat the Zacks Consensus Estimate in three out of the trailing four quarters, the average positive surprise being 11.57%.
Let’s see how things are shaping up prior to this announcement.
Our proven model shows that Huntington is likely to beat earnings because it has the right combination of two key ingredients.
Zacks ESP: Huntington has an Earnings ESP of +2.09%. That is because the Most Accurate estimate is $2.44, while the Zacks Consensus Estimate is pegged lower at $2.39. This is a meaningful and leading indicator of a likely positive earnings surprise.
Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: Huntington has a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates.
Conversely, 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.
The combination of Huntington’s Zacks Rank #3 and +2.09% ESP makes us reasonably certain of an earnings beat.
What’s Driving the Better-Than Expected Earnings?
The third quarter has been significant for Huntington given the contracts the company secured during the period. The company won an initial $272.5 million fixed-price-incentive firm target contract from the U.S. Navy for the planning, advanced engineering and procurement of long lead -time material for the LHA 8 ship, with full funding to follow. The contract is valued at $3.13 billion on the potential exercise of all options and is slated for completion by Jun 2017.
Next, Huntington clinched a modification contract worth $109.9 million to exercise options for nuclear submarines. Another notable contract includes the $400 million deal that the company’s Newport News business division secured for conducting repair work on the U.S. Navy’s nuclear-powered submarines and special mission submersibles.
It is worth noting in this context that Huntington – one of the only two nuclear-powered submarine makers for the Navy – is also the primary industrial developer in Virginia. Through its Newport News segment, the company operates as the nation's sole designer, builder and refueler of nuclear-powered aircraft carriers. Over 70% of the active Navy fleet consists of Huntington Ingalls ships.
On the flip side, management expects to witness consistent volume and margin pressure in Huntington’s Newport News division, in the third quarter and beyond as the company focuses on delivering three aircraft carriers.
Additionally, Huntington continues to expect total revenue in the full year to be relatively flat on a year-over-year basis.
The Zacks Consensus Estimate for the third quarter is pegged at 38 cents, reflecting a decrease of 38.52% year over year. The Zacks Consensus Estimate for revenues is at $526.12 million, implying a 7.77% decline.
Other Stocks to Consider
Here are a few other stocks in the Aerospace and Defense space worth considering on the basis of our model which shows that they have the right combination to pull off a beat:
Spirit AeroSystems, Inc. (SPR - Free Report) has an earnings ESP of +0.94% and a Zacks Rank #3. The company is scheduled to report quarterly results on Nov 1.
Triumph Group, Inc. (TGI - Free Report) has an earnings ESP of +4.27% and a Zacks Rank #3. The company is slated to release results on Nov 3.
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Huntington Ingalls (HII) Q3 Earnings: A Beat in the Cards?
Huntington Ingalls Industries, Inc. (HII - Free Report) , the largest U.S. military shipbuilder, is set to release third-quarter 2016 results on Nov 3, before the opening bell.
In the preceding quarter, the company posted a positive earnings surprise of 0.43%. Moreover, Huntington beat the Zacks Consensus Estimate in three out of the trailing four quarters, the average positive surprise being 11.57%.
Let’s see how things are shaping up prior to this announcement.
HUNTINGTON INGL Price and EPS Surprise
HUNTINGTON INGL Price and EPS Surprise | HUNTINGTON INGL Quote
Why a Likely Positive Surprise?
Our proven model shows that Huntington is likely to beat earnings because it has the right combination of two key ingredients.
Zacks ESP: Huntington has an Earnings ESP of +2.09%. That is because the Most Accurate estimate is $2.44, while the Zacks Consensus Estimate is pegged lower at $2.39. This is a meaningful and leading indicator of a likely positive earnings surprise.
Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: Huntington has a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates.
Conversely, 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.
The combination of Huntington’s Zacks Rank #3 and +2.09% ESP makes us reasonably certain of an earnings beat.
What’s Driving the Better-Than Expected Earnings?
The third quarter has been significant for Huntington given the contracts the company secured during the period. The company won an initial $272.5 million fixed-price-incentive firm target contract from the U.S. Navy for the planning, advanced engineering and procurement of long lead -time material for the LHA 8 ship, with full funding to follow. The contract is valued at $3.13 billion on the potential exercise of all options and is slated for completion by Jun 2017.
Next, Huntington clinched a modification contract worth $109.9 million to exercise options for nuclear submarines. Another notable contract includes the $400 million deal that the company’s Newport News business division secured for conducting repair work on the U.S. Navy’s nuclear-powered submarines and special mission submersibles.
It is worth noting in this context that Huntington – one of the only two nuclear-powered submarine makers for the Navy – is also the primary industrial developer in Virginia. Through its Newport News segment, the company operates as the nation's sole designer, builder and refueler of nuclear-powered aircraft carriers. Over 70% of the active Navy fleet consists of Huntington Ingalls ships.
On the flip side, management expects to witness consistent volume and margin pressure in Huntington’s Newport News division, in the third quarter and beyond as the company focuses on delivering three aircraft carriers.
Additionally, Huntington continues to expect total revenue in the full year to be relatively flat on a year-over-year basis.
The Zacks Consensus Estimate for the third quarter is pegged at 38 cents, reflecting a decrease of 38.52% year over year. The Zacks Consensus Estimate for revenues is at $526.12 million, implying a 7.77% decline.
Other Stocks to Consider
Here are a few other stocks in the Aerospace and Defense space worth considering on the basis of our model which shows that they have the right combination to pull off a beat:
Spirit AeroSystems, Inc. (SPR - Free Report) has an earnings ESP of +0.94% and a Zacks Rank #3. The company is scheduled to report quarterly results on Nov 1.
Leidos Holdings, Inc. (LDOS - Free Report) , slated to report on Nov 3, has an earnings ESP of +6.32% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Triumph Group, Inc. (TGI - Free Report) has an earnings ESP of +4.27% and a Zacks Rank #3. The company is slated to release results on Nov 3.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>