Huntington Ingalls Industries, Inc. (NYSE:HII) shareholders are probably feeling a little disappointed, since its shares fell 2.7% to US$181 in the week after its latest quarterly results. Huntington Ingalls Industries beat revenue expectations by 7.0%, recording sales of US$2.3b. Statutory earnings per share (EPS) came in at US$4.23, some 6.0% short of analyst estimates. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, Huntington Ingalls Industries' nine analysts currently expect revenues in 2020 to be US$8.95b, approximately in line with the last 12 months. Per-share earnings are expected to bounce 31% to US$19.21. In the lead-up to this report, the analysts had been modelling revenues of US$8.96b and earnings per share (EPS) of US$20.38 in 2020. The analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share numbers for next year.
The consensus price target held steady at US$238, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Huntington Ingalls Industries analyst has a price target of US$295 per share, while the most pessimistic values it at US$182. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast revenue decline of 1.5%, a significant reduction from annual growth of 5.6% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 4.6% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Huntington Ingalls Industries is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Huntington Ingalls Industries' revenues are expected to perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Huntington Ingalls Industries going out to 2024, and you can see them free on our platform here..
Don't forget that there may still be risks. For instance, we've identified 5 warning signs for Huntington Ingalls Industries (1 makes us a bit uncomfortable) you should be aware of.
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