HII is Up Over 50% From 12-Month Low Ahead of Q2 Earnings

Huntington Ingalls Industries’ earnings are expected to keep falling

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Huntington Ingalls Industries, Inc. (NYSE:HII) is the largest military shipbuilding company in the United States. HII is also a key provider of unmanned systems, defense and federal solutions, nuclear and environmental services and fleet sustainment services to partners in government and industry. Huntington Ingalls Industries is comprised of three divisions: Newport News Shipbuilding, Ingalls Shipbuilding, and Technical Solutions.

On July 8, Huntington Ingalls announced that the company will be releasing second quarter of 2021 financial results on Thursday, August 5, and will be hosting an earnings conference call the same day. Over the past year, HII has outperformed earnings expectations on three of the last four earnings reports released.

For Q2 of 2020, Huntington Ingalls missed analyst estimates by a margin of $2.87 and reported an earnings per share (EPS) of $1.30. For Q3 of 2020, the shipbuilding company's EPS increased to $5.45 and beat expectations by a margin of $1.32. For Q4 of 2021, HII posted another increase in earnings, rising to $6.15 per share and beating estimates by a margin of $1.59. For Q1 of 2020, Huntington Ingalls reported an EPS of $3.68 and beat expectations by a margin of $1.05. Analysts expect that HII will be reporting an EPS of $2.49 for the second quarter, marking a large drop in quarterly earnings.

Huntington Ingalls stock has increased by about 23% in price year-over-year and is currently up approximately 51% since hitting a 52-week low of $136.44 in September of last year. Additionally, shares of HII have grown by 26% year-to-date, but are currently down by 8% since reaching a 52-week high of $224.13 in early June. Huntington Ingalls stock also has a forward dividend of $4.56 and a dividend yield of 2.15%.

From a fundamental point of view, Huntington Ingalls stock appears to be an attractive value investment. HII currently trades at a low price-earnings ratio 12.43. However, Huntington Ingalls Industries stock has a forward price-earnings ratio of 15.17 which is still a good valuation, but signals the expected decrease in earnings. In addition, HII’s trailing 12-month net income is currently down by 3.5% and its bottom-line growth has remained inconsistent in recent years. On the top-line, Huntington Ingalls Industries has only grown revenues by 26% since fiscal 2017. Moreover, the shipbuilding company has $407 million in cash and $1.85 billion in total debt. Overall, Huntington Ingalls stock may be best suited as a dividend play, considering its limited growth potential.


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