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Huntington Ingalls (HII) to Post Q4 Earnings: Beat in Store?

Zacks Equity Research

Huntington Ingalls Industries, Inc. HII is set to report fourth-quarter and full-year 2018 results on Feb 14, before market open.

In the last reported quarter, this military shipbuilder delivered a positive earnings surprise of 27.78%. Coming to expectations for the to-be-reported quarter, rising demand 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 Segment – 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. Increasing geo-political tensions across the globe have prompted the U.S. government to strengthen its arsenal with aircraft carriers being a notable part of the same.

We expect the upcoming quarterly result to duly reflect solid revenue growth from the Newport News segment. This is because higher sales volumes for aircraft carriers and submarine support services have been driving this division’s top line over the past couple of quarters. The Zacks Consensus Estimate for fourth-quarter revenues at this segment is pegged at $1,184 million, reflecting a 4% improvement year over year.

Huntington Ingalls Industries, Inc. Price and EPS Surprise

Huntington Ingalls Industries, Inc. Price and EPS Surprise | Huntington Ingalls Industries, Inc. Quote

Solid Order Growth

A steady inflow of orders from the Pentagon has always provided an impetus to Huntington Ingalls’ quarterly results. Such order growth tends to significantly boost revenues of major defense contractors like Huntington Ingalls. In sync with this, the Zacks Consensus Estimate for fourth-quarter revenues stands at $2.06 billion, mirroring a 3.1% increase year over year.

The company’s bottom-line performance is also likely to be driven by such contract wins. Considering the consistent contract wins that Huntington Ingalls witnesses, the consensus estimate for fourth-quarter earnings is pegged at $4.45, reflecting an annual improvement of 43.1%.

What Our Quantitative Model Predicts

Huntington Ingalls possess the right combination of two ingredients — a positive Earnings ESP  and a Zacks Rank #3 (Hold) or higher — that increases the odds of an earnings beat in the fourth quarter.

Earnings ESP: Huntington Ingalls has an Earnings ESP of +3.71%. 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 #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Conversely, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Recent Defense Release

TransDigm Group Incorporated TDG reported first-quarter fiscal 2019 adjusted earnings of $3.85 per share, which surpassed the Zacks Consensus Estimate of $3.35 by 14.9%.

Raytheon Company RTN reported fourth-quarter 2018 earnings per share (EPS) of $2.93 from continuing operations, outpacing the Zacks Consensus Estimate of $2.89 by 1.4%.

Spirit AeroSystems Holdings, Inc. SPR reported fourth-quarter 2018 adjusted earnings of $1.85 per share, which exceeded the Zacks Consensus Estimate of $1.78 by 4%.

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