Huntington Ingalls Industries, Inc. (HII - Free Report) is set to release second-quarter 2017 results on Aug 3 before the opening bell.
Last quarter, the company posted a negative earnings surprise of 31.25%. However, the company surpassed the Zacks Consensus Estimate in two of the past four quarters, with an average positive earnings surprise of 3.04%.
Let’s see how things are shaping up at the company prior to this announcement.
Why a Likely Positive Surprise?
Our proven model shows that Huntington Ingalls is likely to beat earnings this season because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat estimates, and Huntington Ingalls has the right mix.
Zacks ESP: Earnings ESP for the company is +4.96%. This is because the Most Accurate estimate stands at $2.75, higher than the Zacks Consensus Estimate of $2.62. This is a meaningful indicator of a likely positive earnings surprise. 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 when combined with a positive ESP, makes us reasonably confident of an earnings beat this quarter.
Note that we caution against stocks with a Zacks Ranks #4 or 5 (Sell-rated) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Factors at Play
Being the U.S.’ largest military shipbuilder, Huntington Ingalls’ first-quarter 2017 results reported solid performance in shipbuilding, which is expected to reflect in the second-quarter results as well.
In fact the company clinched quite a notable contract this quarter, which, in turn, is likely to boost second-quarter revenue growth. In particular, Huntington Ingalls won a modification contract worth $3 billion from the U.S. Navy to procure the detail, design and construction of the Landing Helicopter Assault (LHA) Replacement (LHA(R)) Flight 1 Amphibious Assault Ship (LHA 8).
The company’s CVN 72 Lincoln aircraft carrier fleet was being refueled and recapitalized in the beginning of the to-be-reported quarter, while management projected to redeliver it to the Navy by May 2017. We can expect further updates on this process once Huntington Ingalls releases its second-quarter results.
On the flip side, management expects no near-term improvement in the company’s relatively weak working capital performance. This might weigh down on the soon-to-be-reported quarter’s outcome.
The Zacks Consensus Estimate for second-quarter earnings is pegged at $2.62, reflecting a 12.93% improvement year over year. The Zacks Consensus Estimate for revenues is $1.79 billion, implying a 5.03% increase.
Other Stocks that Warrant a Look
Here are a few other defense stocks worth considering on the basis of our model which shows that they have the right combination to pull off a beat.
Transdigm Group Inc. (TDG - Free Report) is expected to report quarterly results on Aug 8. The company has an Earnings ESP of +1.01% and a Zacks Rank #2.
Leidos Holdings, Inc. (LDOS - Free Report) is expected to report quarterly results on Aug 3. The company has an Earnings ESP of +1.30% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Spirit AeroSystems, Inc. (SPR - Free Report) is expected to report quarterly results on Aug 2. The company has an Earnings ESP of +3.33% and a Zacks Rank #3.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>