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Why Is Huntington Ingalls (HII) Down 9.8% Since Last Earnings Report?

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It has been about a month since the last earnings report for Huntington Ingalls (HII - Free Report) . Shares have lost about 9.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Huntington Ingalls due for a breakout? 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 Q3 Earnings Top, Revenues Up Y/Y

Huntington Ingalls third-quarter 2018 earnings of $5.29 per share surpassed the Zacks Consensus Estimate of $4.14 by 27.8%. The bottom line also improved 61.8% from $3.27 a year ago, courtesy of solid revenue growth and operating income.

Total Revenues

Total revenues came in at $2.08 billion, which outpaced the Zacks Consensus Estimate of $1.92 billion by 8.3%. The top line also rose 11.8% from $1.86 billion registered a year ago. The upside can be attributed to higher sales volume at all the three business divisions of the company.

Segment Details

Newport News Shipbuilding: Revenues totaled $1,179 million, up 12% year over year backed by higher revenues in naval nuclear support services and aircraft carriers. Operating income improved 24% to $119 million owing to result of favorable changes in workers’ compensation expense.

Ingalls Shipbuilding: Revenues at this segment came in at $694 million, up 17% year over year on account of higher revenues in amphibious assault ships and the Legend-class National Security Cutter (NSC) program. Operating income improved 10.8% to $82 million owing to higher volumes.

Technical Solutions: Revenues at this segment summed $245 million, up 1.7% year over year. The upside was driven by higher oil and gas services and mission driven innovative solutions revenues. Operating income totaled $16 million compared with $22 million in the year-ago quarter.

Backlog

Huntington Ingalls received new orders worth $2.8 billion in third quarter. As a result, the company’s total backlog reached $22 billion as of Sep 30, 2018.

Financial Update

Cash and cash equivalents as of Sep 30, 2018, were $68 million, significantly down from $701 million as of Dec 31, 2017.

Long-term debt, as of Sep 30, 2018, was $1,282 million compared with the 2017-end level of $1,279 million.

Cash from operating activities, at the end of third-quarter 2018, grossed $266 million compared with $380 million at the end of 2017’s third quarter.

How Have Estimates Been Moving Since Then?

Fresh estimates followed an upward path over the past two months.

VGM Scores

Currently, Huntington Ingalls has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

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

Outlook

Huntington Ingalls has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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