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Huntington Ingalls Industries, Inc. (NYSE:HII): Are Analysts Right About The Drop In Earnings?

Simply Wall St

As Huntington Ingalls Industries, Inc. (NYSE:HII) released its latest earnings announcement on 30 June 2019, analyst forecasts seem bearish, as a 9.4% fall in profits is expected in the upcoming year compared with the past 5-year average growth rate of 17%. Currently with a trailing-twelve-month profit of US$836m, the consensus growth rate suggests that earnings will drop to US$758m by 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. For those keen to understand more about other aspects of the company, you can research its fundamentals here.

Check out our latest analysis for Huntington Ingalls Industries

What can we expect from Huntington Ingalls Industries in the longer term?

The view from 11 analysts over the next three years is one of positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. To reduce the year-on-year volatility of analyst earnings forecast, I've inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.

NYSE:HII Past and Future Earnings, August 16th 2019

From the current net income level of US$836m and the final forecast of US$799m by 2022, the annual rate of growth for HII’s earnings is 3.8%. However, if we exclude extraordinary items from net income, we see that earnings is projected to fall over time, resulting in an EPS of $17.58 in the final year of forecast compared to the current $19.09 EPS today. However, the near term margins may change heading into 2022, from the current levels of 10% to 8.8%.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Huntington Ingalls Industries, I've compiled three pertinent aspects you should further research:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is Huntington Ingalls Industries worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Huntington Ingalls Industries is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Huntington Ingalls Industries? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.