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Huntington Ingalls (HII) Q1 Earnings Miss Estimates, Up Y/Y

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Huntington Ingalls Industries, Inc.’s (HII - Free Report) first-quarter 2020 earnings of $4.23 per share missed the Zacks Consensus Estimate of $4.47 by 5.4%. However, the bottom line surged 48.4% from $2.85 reported in the prior-year quarter.

Total Revenues

Total revenues came in at $2.26 billion, exceeding the Zacks Consensus Estimate of $2.11 billion by 7.1%. The top line also rose 8.8% from $2.08 billion in the year-ago quarter. The increase was driven primarily by higher volumes at the Newport News and Ingalls shipbuilding divisions as well as growth in the Technical Solutions division.

Operational Performance

Huntington Ingalls’ total operating income grew 33.5% year over year to $215 million, while operating margin was 9.5% compared with 7.7% in the first quarter of 2019. The increases in both metrics mainly resulted from a more favorable operating FAS/CAS adjustment and higher risk retirement at both Newport News and Ingalls shipbuilding divisions.

Huntington Ingalls received orders worth $900 million during the first quarter. As a result, the company’s total backlog reached $45.2 billion as of Mar 31.

Segmental Performance

Newport News Shipbuilding: Revenues totaled $1,341 million at this segment, up 4.8% year over year, backed by higher revenues in submarine construction.

Meanwhile, operating income improved 17.3% to $95 million, while operating margin expanded 75 bps to 7.1%. These increases were primarily driven by higher risk retirement on the VCS program and the RCOH of USS George Washington (CVN 73).

Ingalls Shipbuilding: Revenues at this segment increased 7.7% to $629 million on account of higher revenues from the San Antonio-class LPD program and the Arleigh Burke-class DDG program.

Also, operating income surged 47.8% to $68 million, while operating margin expanded 293 bps to 10.8%. These increases were primarily driven by higher risk retirement on the LPD and DDG programs.

Technical Solutions: Revenues at this segment summed $317 million, up 32.1% year over year. The upside was primarily led by higher mission-driven innovative solutions (MDIS) revenues attributable to the acquisition of Fulcrum IT Services in 2019 and higher volumes on other MDIS services. The segment incurred an operating loss of $7 million, while operating margin contracted 304 bps during the quarter.

Huntington Ingalls Industries Inc Price, Consensus and EPS Surprise

Financial Update

Cash and cash equivalents as of Mar 31, 2020, were $28 million, significantly down from $75 million as of Dec 31, 2019.

Long-term debt, as of Mar 31, 2020, was $1,667 million compared with the 2019-end level of $1,286 million.

Cash from operating activities, at the end of the first quarter of 2020, grossed $68 million compared with $11 million at the end of first-quarter 2019.

Zacks Rank

Huntington Ingalls carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recent Defense Release

Lockheed Martin Corp. (LMT - Free Report) , a Zacks Rank #3 company, reported first-quarter 2020 earnings of $6.08 per share, which surpassed the Zacks Consensus Estimate of $5.76 by 5.5%. The bottom line also improved 1.5% from the year-ago quarter’s $5.99.

General Dynamics Corporation (GD - Free Report) , a Zacks Rank #3 company, reported first-quarter 2020 earnings from continuing operations of $2.43 per share, which missed the Zacks Consensus Estimate of $2.46 by 1.2%. Moreover, earnings declined 5.1% from $2.56 in the year-ago quarter.

Teledyne Technologies Inc. (TDY - Free Report) , a Zacks Rank #3 company, reported first-quarter 2020 earnings of $2.28 per share, which surpassed the Zacks Consensus Estimate of $2.10 by 8.6%. The bottom line also improved 12.9% from the year-ago quarter’s $2.02.

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