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Why Is Huntington Ingalls (HII) Down 28.7% 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 28.7% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Huntington Ingalls Q4 Earnings Top, Revenues Up Y/Y

Huntington Ingalls Industries, Inc.’s fourth-quarter 2019 earnings of $4.36 per share surpassed the Zacks Consensus Estimate of $4.24 by 2.83%. However, the reported figure declined 11.7% from $4.94, reported a year ago.

For 2019, the company reported earnings of $14.09 per share, which outpaced the Zacks Consensus Estimate of $13.87 by 1.6%. However, the bottom line declined 26.6% from $19.09 registered a year ago.

Total Revenues

Total revenues came in at $2,412 million exceeding the Zacks Consensus Estimate of $2,339 million by 3.1%. The top line also rose 9.7% from $2,199 million registered in the year-ago quarter. The upside can be attributed to higher sales volume at all the three business divisions of the company.

In 2019, the company generated revenues of $8,899 million, which once again outpaced the Zacks Consensus Estimate of $8,830 million by 0.8% and also improved 8.8% from $8,176 million registered in the prior year.

Segment Details

Newport News Shipbuilding: Revenues totaled $1,390 million at this segment, up 8.8% year over year backed by higher revenues in submarine construction. Meanwhile, operating income surged 133.3% to $133 million due to award of the VCS Block V contract, as well as contract changes for support services on Los Angeles-class submarines.

Ingalls Shipbuilding: Revenues at this segment came in at $702 million, up 0.4% year over year, due to higher revenues on the San Antonio-class LPD program and Legend-class National Security Cutter (NSC) program. However, operating income declined 29.8% to $59 million due to lower risk retirement on the LHA and LPD programs, as well as recoveries related to a 2018 settlement agreement.

Technical Solutions: Revenues at this segment summed $369 million, up 38.2% year over year. The upside is primarily attributable to higher mission driven innovative solutions (MDIS) revenues as well as higher fleet support and oil and gas revenues. Operating loss amounted to $19 million against the operating income of $7 million in the year-ago quarter.

Backlog

Huntington Ingalls received new orders worth $9.7 billion in the fourth quarter. As a result, the company’s total backlog reached $46.5 billion as of Dec 31, 2019.

Financial Update

Cash and cash equivalents as of Dec 31, 2019, were $75 million, significantly down from $240 million as of Dec 31, 2018.

Long-term debt, as of Dec 31, 2019, was $1,286 million compared with the 2018-end level of $1,283 million.

Cash from operating activities, at the end of 2019, grossed $896 million compared with $914 million at the end of 2018.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.


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