What's in Store for Huntington Ingalls (HII) in Q2 Earnings?

Zacks Equity Research
·4-min read

Huntington Ingalls Industries, Inc. HII is set to report second-quarter 2020 results on Aug 6, 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 13.39%.

The company’s Newport News segment is likely to reflect rising demand for aircraft carriers and submarine construction.

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

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.

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

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 this trend to have prevailed in the second quarter as well, since defense-related activities remained moderately resilient amid the coronavirus pandemic.

The Zacks Consensus Estimate for second-quarter revenues at Newport News is pegged at $1,318 million, implying a 4% improvement from the year-ago quarter’s reported figure.

Other Growth Drivers

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

At the end of March, the Ingalls Shipbuilding division successfully delivered LPD 28 Fort Lauderdale, which is likely to have contributed favorably to the segment’s quarterly revenues.

In line with this, the Zacks Consensus Estimate for second-quarter revenues at its Ingalls Shipbuilding division is pegged at $653 million, indicating a 5% improvement from the figure reported in the year-ago quarter.

However, the technical solutions unit is expected to have witnessed a 30% annual plunge in top-line performance during the second quarter, which must have dragged down the company’s overall revenues. Notably, the Zacks Consensus Estimate for the company’s second-quarter revenues stands at $2.14 billion, suggesting a drop of 2.2% from the year-earlier quarter’s reported figure.

However ,the company is expected to have witnessed improved margin performance as it has been focused on reducing capital expenditures.
The Zacks Consensus Estimate for second-quarter earnings per share is pegged at $4.16, implying an increase of 35.5% from the year-ago reported figure.

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 #5 (Strong Sell), currently.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Recent Defense Releases

Teledyne Technologies TDY reported second-quarter 2020 adjusted earnings of $2.43 per share, which surpassed the Zacks Consensus Estimate of $2.01 by 20.9%.

Lockheed Martin LMT reported second-quarter 2020 adjusted earnings of $6.13 per share, which surpassed the Zacks Consensus Estimate of $5.71 by 7.4%.

Hexcel Corporation HXL reported second-quarter 2020 adjusted earnings of 8 cents per share, which missed the Zacks Consensus Estimate of 20 cents by 60%.

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