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Why is Huntington Ingalls (HII) Up 6.6% Since Its Last Earnings Report?

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It has been about a month since the last earnings report for Huntington Ingalls Industries, Inc. (HII - Free Report) . Shares have added about 6.6% in that time frame.

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

Huntington Ingalls Q1 Earnings Miss, Revenues Up Y/Y

Huntington Ingalls Industries’ first-quarter 2018 earnings of $3.48 per share missed the Zacks Consensus Estimate of $4.07 by 14.5%. However, the bottom line improved 36% from $2.56 a year ago.

Total Revenues

Total revenues came in at $1.87 billion, which surpassed the Zacks Consensus Estimate of $2.01 billion by 6.2%. The top line also rose 8.7% from the year-ago $1.72 billion. The upside was driven by higher sales volume at the Newport News and the Ingalls shipbuilding divisions.

Segment Details

Newport News Shipbuilding: Revenues totaled $1,082 million, up 11.4% year over year backed by higher revenues in naval nuclear support services and aircraft carriers. Operating income declined 29.2% to $51 million due to one-time bonus payments in 2018, related to recently enacted federal tax reform. Also, year-to-year variances in contract mix affected the operating income.

Ingalls Shipbuilding: Revenues at this segment came in at $585 million, up 6.4% year over year on higher revenues in amphibious assault ships. Operating income dropped 3% to $64 million due to lower risk retirement on the NSC program.

Technical Solutions: Revenues at this segment were $233 million, up 3.6% year over year driven by higher revenues in oil and gas and fleet support services. Operating income was $2 million compared to an operating loss of $18 million in the year-ago quarter.

Backlog

Huntington Ingalls received new orders worth $2.6 billion in first quarter. As a result, the company’s total backlog reached $22 billion as of Mar 31, 2018.

Financial Update

Cash and cash equivalents as of Mar 31, 2018, were $528 million, down from $701 million as of Dec 31, 2017.

Long-term debt, as of Mar 31, 2018, was $1,280 million compared with the 2017-end level of $1,279 million.

Cash from operating activities, at the end of first-quarter 2018, was $120 million compared with $98 million at the end of 2017’s first quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.

VGM Scores

At this time, HII has a great Growth Score of A, though it is lagging a lot on the momentum front with a C. The stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

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

Based on our scores, the stock is primarily suitable for growth investors while also being suitable for those looking for value and to a lesser degree momentum.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of this revision indicates a downward shift. It's no surprise HII has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.




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