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Will Order Growth Aid Huntington Ingalls (HII) Q2 Earnings?

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Huntington Ingalls Industries, Inc. (HII - Free Report) is set to report second-quarter 2018 results on Aug 2, before the market opens.

In the last reported quarter, this military shipbuilder came up with a negative earnings surprise of 14.50%. Coming to expectations for the to-be-reported quarter, higher volumes for aircraft carriers are likely to boost the company’s Newport News segment.

Let’s discuss the factors influencing Huntington Ingalls’ quarterly results, in brief.

Newport News – A Key Catalyst

Huntington Ingalls’ Newport News is the nation's sole designer, builder and refueler of nuclear-powered aircraft carriers. Notably, this division, generates more than 50% of the company’s total revenues. On the first quarter earnings call, the company announced that its SSN 789 Indiana ship is prepared for sea trials as well as delivery to the Navy in the second quarter. Also, the company  completed and shipped the final module of SSN 792 Vermont, the first Block IV boat, in the first quarter.  

These developments make us optimistic about the Newport News segment’s solid revenue growth in the upcoming quarterly result, considering the fact that higher volume for aircraft carriers and submarine support services have been driving this segment’s top line in past couple of quarters. In line with this, the Zacks Consensus Estimate for its second-quarter revenues is pegged at $1,045 million, reflecting an annual improvement of 5.3%.

Order Growth – A Major Positive

A steady inflow of orders from the Pentagon has always provided an impetus to Huntington Ingalls’ results. Keeping this trend alive, the company won a string of contracts like the $200 million a modification deal to purchase additional long lead time material for supporting the USS Enterprise (CVN 80) and a $91 million deal for conducting repair and maintenance work on Navy nuclear aircraft carriers.

Such order growth tends to significantly boost revenues of major defense contractors like Huntington Ingalls. In sync with this, the Zacks Consensus Estimate for the company’s second-quarter revenues stands at $1.90 billion, implying a 2.4% year-over-year increase.

These latest contract wins also bolsters a company’s bottom-line performance. Considering the contracts that Huntington Ingalls won during the second quarter, the consensus estimate for the its second-quarter earnings is pegged at $4.21 per share, which reflects an annual improvement of 31.2%.

Here’s What Our Quantitative Model Predicts

Huntington Ingalls does not possess the right combination of two main ingredients — a positive Earnings ESP  and a Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat in the second quarter.

Earnings ESP: Huntington Ingalls has an Earnings ESP of -2.56%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #4 (Sell).

Stocks That Warrant a Look

Here are some companies from the Aerospace sector that investors may want to consider as our model shows that these have the right combination of elements to post earnings beat this quarter:

TransDigm Group (TDG - Free Report) is expected to report third-quarter fiscal 2018 results on Aug 7. The company has an Earnings ESP of +1.00% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recent Defense Release

General Dynamics Corporation (GD - Free Report) reported second-quarter 2018 adjusted earnings of $2.82 per share, which surpassed the Zacks Consensus Estimate of $2.49 by 13.3%.

Hexcel Corporation (HXL - Free Report) reported second-quarter 2018 adjusted earnings of 75 cents per share, which missed the Zacks Consensus Estimate of 76 cents by 1.3%.

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