Why Is Huntington Ingalls (HII) Up 3.2% Since the Last Earnings Report?

It has been about a month since the last earnings report for Huntington Ingalls Industries, Inc. HII. Shares have added about 3.2% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Huntington Ingalls Misses Q1 Earnings, Sales Drop Y/Y

Huntington Ingalls first-quarter 2017 adjusted earnings of $1.87 per share missed the Zacks Consensus Estimate of $2.72 by 31.3%.

Adjusted earnings also declined 21.4% from $2.38 per share in the year-ago quarter owing to a decline in the top line and operating income. Barring the adjustment, the company’s reported earnings came in at $2.56 per share, reflecting a year-over-year deceleration of 10.8%.

Total Revenue

Total revenue in the first quarter was $1.72 billion, below the Zacks Consensus Estimate of $1.82 billion. The top line also dropped 2.2% from the year-ago figure of $1.76 billion. The downside was primarily due to lower contribution from its Ingalls and Newport News divisions.

Segment Details

Newport NewsShipbuilding: Segment revenues were $971 million, down 2.2% year over year due to lower sales in submarines. Operating income declined 11.1% to $72 million, owing to lower volume and risk retirement on the VCS program, partially offset by higher volume on the advance planning contract for the refueling and overhaul (RCOH) of USS George Washington.

Ingalls Shipbuilding: Segment revenues were $550 million, down 6.1% year over year on lower revenues in assault ships and surface combatants. Operating income at the segment dropped 19.5% to $66 million, thanks to lower risk retirement on USS John P. Murtha and Portland (LPD 27), partially offset by higher risk retirement on the NSC program.

Technical Solutions: Segment revenues were $225 million, up 8.2% year over year primarily due to the acquisition of Camber. Operating loss at the segment was $18 million against the year-ago period’s operating income of $3 million. The deterioration was due to establishment of a reserve against accounts receivable on a nuclear and environmental commercial contract in first-quarter 2017.

Backlog

The company received new orders worth $600 million during the reported quarter, as a result of which its total backlog reached $20 billion as of Mar 31, 2017.

Financial Update

Cash and cash equivalents as of Mar 31, 2017, were $608 million, down from $720 million as of Dec 31, 2016.

Long-term debt, as of Mar 31, 2017, was $1,273 million, below the 2016-end level of $1,343 million.

Cash from operating activities in first-quarter 2017 was $98 million, compared with $54 million in first-quarter 2016.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.

Huntington Ingalls Industries, Inc. Price and Consensus

 

Huntington Ingalls Industries, Inc. Price and Consensus | Huntington Ingalls Industries, Inc. Quote

VGM Scores

At this time, Huntington Ingalls' stock has a subpar Growth Score of 'D', however its Momentum is doing a bit better with a 'C'. The stock was allocated a grade of 'A' on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for value investors than momentum investors.

Outlook

The Zacks Consensus Estimate for the current quarter has moved up over the past 30 days. Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Click for Free Huntington Ingalls Industries, Inc. (HII) Stock Analysis Report >>
 
To read this article on Zacks.com click here.
 
Zacks Investment Research