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What's in Store for Huntington Ingalls (HII) in Q4 Earnings?

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Zacks Equity Research
·4 min read
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Huntington Ingalls Industries, Inc. HII is set to report fourth-quarter 2020 results on Feb 11, before market open.

This military shipbuilder missed the Zacks Consensus Estimate in two of the trailing four quarters and beat in the remaining two, the average negative surprise being 20.30%.

The company’s Newport News and Ingalls segments are likely to have boosted its Q4 revenues.

Let’s discuss how things have shaped up prior to the announcement.

Huntington Ingalls Industries, Inc. Price and EPS Surprise

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

Huntington Ingalls Industries, Inc. price-eps-surprise | Huntington Ingalls Industries, Inc. Quote

Newport News Segment — A Key Catalyst

Huntington Ingalls’ Newport News is the nation's sole designer, builder and refueler of nuclear-powered aircraft carriers. The segment generates more than 50% of the company’s total revenues.

Increased volumes in aircraft carrier construction along with submarine construction tend to boost revenue growth for the company’s Newport News business division. We expect these along with upbeat fleet support services to have boosted this unit’s performance in the fourth quarter.

The Zacks Consensus Estimate for fourth-quarter revenues of Newport News is pegged at $1,477 million, implying a 6.3% improvement from the year-ago quarter’s reported figure.

Other Factors to Consider

The company has been making strategic investments within its Ingalls Shipbuilding division that has enabled the unit to secure certain key contracts in the recent past. Such notable contract wins in the past quarters are expected to have boosted this unit’s business volume in the soon-to-be-reported quarter.

In line with this, the Zacks Consensus Estimate for fourth-quarter revenues for the Ingalls Shipbuilding division is pegged at $732 million, indicating a 4.3% improvement from the figure reported in the year-ago quarter.

However, the technical solutions unit is expected to have witnessed a 19.5% decline in top-line performance during the fourth quarter on account of lower revenues at the San Diego shipyard due to the conclusion of several repair contracts in the recent times.

Currently, the Zacks Consensus Estimate for the company’s fourth-quarter revenues stands at $2.47 billion, suggesting a 2.3% rise from the year-earlier quarter’s reported figure.

A favorable FAS/CAS adjustment related to the company’s pension and post-retirement benefit plans are expected to have boosted operating margin for the company, which in turn must have had a favorable impact on its quarterly earnings. Also, post-acquisition cost synergies along with robust cost management initiatives by the company are likely to have benefited its bottom-line performance in the fourth quarter.

The Zacks Consensus Estimate for fourth-quarter earnings per share is pegged at $4.49, implying an increase of 3% from the year-ago reported figure.

A number of Huntington Ingalls’ capital projects initially planned for 2020 have experienced delayed starts or are being pushed into 2021, primarily due to the pandemic’s impacts. This should get duly reflected in the company’s balance sheet when the company reports in the form of lower expenses year over year.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Huntington Ingalls this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But this is not the case here.

Earnings ESP: The company’s Earnings ESP is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Huntington Ingalls carries a Zacks Rank #3, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Recent Defense Releases

Lockheed Martin Corp. LMT reported fourth-quarter 2020 earnings from continuing operations of $6.38 per share, in line with the Zacks Consensus Estimate.

Hexcel Corporation HXL reported fourth-quarter 2020 loss of 18 cents per share, in line with the Zacks Consensus Estimate.

General Dynamics Corporation GD reported fourth-quarter 2020 earnings from continuing operations of $3.49 per share, which missed the Zacks Consensus Estimate of $3.55 by 1.7%.

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General Dynamics Corporation (GD) : Free Stock Analysis Report

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Hexcel Corporation (HXL) : Free Stock Analysis Report

Huntington Ingalls Industries, Inc. (HII) : Free Stock Analysis Report

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