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Q3 Earnings Preview for Huntington Ingalls Industries (NYSE:HII)

in EARNINGS/INVESTING IDEAS by

Huntington Ingalls Industries, Inc. (NYSE:HII) is scheduled to report Q3 earnings results on November 5, 2020.

The company is expected to report earnings of $4.14/share on revenue of $2.197 billion. The consensus earnings per share (EPS) of $4.14/share is based on a poll of 10 analysts and represents a growth in eps of 10.6% over the same quarter last year, when the company reported earnings of $3.74/share.

The revenue forecast of $2.197 billion based on a poll of 11 analysts implies a year-over-year (YoY) decline in revenue of −1.0%. Last year the company reported $2.219 billion in revenue for the quarter.

Expected to report EPS growth of 10.6% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $2,196.64 $2,219.00 −1.0%
EPS $4.14 $3.74 10.6%

Earnings Call Trends

Historically, management has exceeded analyst expectations 4 out of the last 8 tracked quarters, and missed expectations 4 quarters.

What are your expectations from Huntington Ingalls Industries, Inc. for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $4.14 $1.30 −68.6% Missed
Q1, 2020 $4.52 $4.23 −6.4% Missed
Q4, 2019 $4.18 $4.36 4.2% Beat
Q3, 2019 $3.63 $3.74 3.0% Beat
Q2, 2019 $3.57 $3.07 −14.1% Missed
Q1, 2019 $3.28 $2.85 −13.0% Missed
Q4, 2018 $4.64 $4.94 6.6% Beat
Q3, 2018 $4.14 $5.29 27.7% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by falling −6.0%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
August 6, 2020 $178.67 $167.90 −6.0% Decline
May 7, 2020 $178.65 $180.58 1.1% Increase
February 13, 2020 $270.08 $246.21 −8.8% Decline
November 7, 2019 $233.99 $251.21 7.4% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −2.94, the model suggests that the company is not likely to be an earnings manipulator. A value of −2.94 implies a 0.2% chance of earnings manipulation.

Fundamentals And Technical Analysis

Huntington Ingalls Industries, Inc. is currently trading at $142.46/share, down −2.8% for the day. The company is trading at approximately 51.2% of its 52-week high of $279.71/share. The company’s stock price is down −15.2% since the last earnings report and down −4.7% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 46.13 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NYSE:HII Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 11.01 and a forward P/E multiple of 10.21.

Huntington Ingalls Industries, Inc.’s current share price also implies a price-to-book (P/B) multiple of 3.46. The following table summarizes some other key fundamental ratios:

Data as of October 28, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $142.46
P/E Ratio 11.0x
P/E Ratio (Fwd) 10.2x
PEG Ratio −0.6
Total Debt / Total Capital 29.2%
Levered Free Cash Flow $752 million
EV / EBITDA 7.8x

Finbox

Huntington Ingalls Industries, Inc. is a mid-cap stock with a market capitalization of $5.933 billion and a total enterprise value of $7.754 billion. The company operates in the Industrials sector and the Aerospace & Defense industry.

Huntington Ingalls Industries, Inc. engages in the designing, building, overhauling, and repairing military ships in the United States. It operates through three segments: Ingalls Shipbuilding, Newport News Shipbuilding, and Technical Solutions. The company is involved in the design and construction of non-nuclear ships comprising amphibious assault ships that include deck amphibious ships and transport dock ships; surface combatants; and national security cutters for the U.S. Navy and U.S. Coast Guard. It also provides nuclear-powered ships, such as aircraft carriers and submarines, as well as refueling and overhaul, and inactivation services. In addition, the company offers naval nuclear support services, including fleet services comprising design, construction, maintenance, and disposal activities for in service U.S. Navy nuclear ships; and maintenance services on nuclear reactor prototypes. Further, it provides fleet support services comprising technical and waterfront ship services; naval architecture and marine engineering; integrated logistics support; technical documentation development; warehousing, asset management, and material readiness; operational and maintenance training development and delivery; software design and development; IT infrastructure support, and data delivery and management; and cyber security and information assurance services, as well as undersea vehicle and specialized craft development and prototyping services. Additionally, the company offers information technology and integrated missions solutions services; nuclear and environmental services; engineering, procurement, and construction management services to the oil and gas industry; and nuclear management and operations, and environmental management services to the Department of Energy, Department of Defense, state and local governments, and the private sector. Huntington Ingalls Industries, Inc. was founded in 1886 and is headquartered in Newport News, Virginia.

Expertise: financial modeling, mergers & acquisitions. Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights: - Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores. - Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets. Andy can be reached at andy@finbox.io or at +1 (516) 778-6257.

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