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1. Company Snapshot

1.a. Company Description

Huntington Ingalls Industries, Inc.engages in 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; expeditionary warfare 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 of ships.In addition, the company offers naval nuclear support services, including fleet services comprising design, construction, maintenance, and disposal activities for in-service the U.S. Navy nuclear ships; and maintenance services on nuclear reactor prototypes.


Further, it provides life-cycle sustainment services to the U.S. Navy fleet and other maritime customers; high-end information technology and mission-based solutions for Department of Defense (DoD), intelligence, and federal civilian customers; nuclear management and operations and environmental management services for the Department of Energy, DoD, state and local governments, and private sector companies; defense and federal solutions; and unmanned systems.Huntington Ingalls Industries, Inc.was founded in 1886 and is headquartered in Newport News, Virginia.

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1.b. Last Insights on HII

Huntington Ingalls Industries, Inc.'s recent performance was positively driven by strong Q3 earnings, which beat estimates, and double-digit growth across all three business segments. The company's quarterly dividend was increased to $1.38 per share, a $0.03 rise, demonstrating its commitment to shareholder value. Additionally, its Q3 earnings per share of $3.68 surpassed the Zacks Consensus Estimate of $3.29. The company's strategy to expand its industrial base through distributed shipbuilding also contributed to its growth.

1.c. Company Highlights

2. Huntington Ingalls Industries' Earnings Report: A Mixed Bag

Huntington Ingalls Industries (HII) reported a strong quarterly performance, with earnings per share (EPS) of $3.68, beating analyst estimates of $3.29. Revenue growth was driven by the shipbuilding segment, with a significant increase in throughput. The company's Mission Technologies segment also saw strong growth, driven by higher volume in C5ISR, cyber, electronic warfare & space, and live, virtual, and constructive training. The revenue for the quarter was not explicitly stated, but the company's guidance for the full year suggests a positive trend.

Publication Date: Nov -06

📋 Highlights
  • Shipbuilding Throughput Adjustment:: Revised 15% annual throughput improvement (down from 18%) due to slower progress on pre-COVID contracts.
  • Free Cash Flow Outperformance:: $16 million above guidance driven by stronger collections and delayed disbursements in Q3.
  • Mission Technologies Growth:: Revenue guidance raised to $3B–$3.1B (up from prior) fueled by C5ISR, cyber, and unmanned systems demand.
  • Effective Tax Rate Update:: 22% for 2024 (up from prior) due to elevated Q3 tax rates.
  • Cost Initiative Progress:: $250 million savings on track, with $600 million annual cash flow run rate expected between 2024–2025.

Segment Performance

The shipbuilding segment saw a significant increase in throughput, driven by higher material receipt and wage investments. Ingalls grew 25%, driven by material volume on the surface command, while Newport News grew 15%, driven by material on contracts. The company's efforts to drive higher shipbuilding throughput, including increased outsourcing, are yielding results. As Christopher Kastner stated, "we were pleased to see the strong performance in shipbuilding, driven by higher-than-expected material receipt, the wage investments, and our broader efforts to drive higher shipbuilding throughput, including increased outsourcing."

Guidance and Outlook

The company revised its guidance for the full year, expecting a 15% throughput improvement, down from the original expectation of 18%. The company is also expecting revenue between $3 billion and $3.1 billion for Mission Technologies, an increase from the prior guidance range. The effective tax rate for the year is expected to be 22%. Analysts estimate next year's revenue growth at 4.8%, indicating a positive trend.

Valuation

HII's valuation metrics suggest a relatively stable stock. The Price-to-Earnings (P/E) ratio is 21.18, while the Price-to-Book (P/B) ratio is 2.42. The Dividend Yield is 1.76%, indicating a relatively attractive return for income investors. The Free Cash Flow Yield is 6.84%, suggesting a healthy cash generation capability. With a Return on Equity (ROE) of 11.79% and a Return on Invested Capital (ROIC) of 4.96%, the company is generating returns above its cost of capital.

Future Prospects

3. NewsRoom

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HII Partners with University of Maryland's School of Engineering to Accelerate Defense Technologies

Dec -04

Source: globenewswire.com

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Media Advisory – Newport News Shipbuilding to Host Barb (SSN 804) Keel Laying

Dec -04

Source: globenewswire.com

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Huntington Ingalls Secures Contract to Support Aircraft Carrier

Dec -04

Source: zacks.com

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30% of the S&P 500 Is Mag 7 Tech Stocks, but This ETF Refuses to Own a Single One

Dec -02

Source: 247wallst.com

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First Look: CME outage, Black Friday shifts, AI job impact

Nov -28

Source: gurufocus.com

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Huntington Ingalls Supplies Virginia-Class Submarine to US Navy

Nov -25

Source: zacks.com

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HII Completes Acceptance Trials for Destroyer Ted Stevens (DDG 128)

Nov -21

Source: globenewswire.com

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HII Delivers Virginia-Class Submarine Massachusetts (SSN 798) to U.S. Navy

Nov -21

Source: globenewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (3.69%)

6. Segments

Newport News

Expected Growth: 3.5%

Newport News' 3.5% growth is driven by increasing demand for nuclear-powered aircraft carriers, steady revenue from submarine maintenance, and growing investments in shipyard infrastructure. Additionally, the segment benefits from a strong backlog of contracts, including the construction of the USS Enterprise (CVN-80) and the refueling and complex overhaul of the USS George Washington (CVN-73).

Ingalls

Expected Growth: 4.2%

Ingalls' 4.2% growth driven by increasing demand for amphibious assault ships, such as LPD-17 and LHA-6, and continued investment in nuclear-powered aircraft carriers. Additionally, the company's focus on cost savings initiatives, improved operational efficiency, and a strong backlog of orders contribute to its growth momentum.

Mission Technologies

Expected Growth: 3.8%

Mission Technologies' 3.8% growth is driven by increasing demand for cybersecurity and intelligence services, expansion of its cloud-based solutions, and growing investments in unmanned systems and autonomous technologies. Additionally, the segment benefits from its diversified customer base, including the U.S. Department of Defense and federal civilian agencies.

Intersegment Eliminations

Expected Growth: 0.0%

Huntington Ingalls Industries' Intersegment Eliminations growth rate of 0.0% is driven by the absence of significant transactions between its segments, including Ingalls Shipbuilding, Newport News Shipbuilding, and Technical Solutions. This lack of intersegment activity is due to the company's focus on external customer sales, resulting in minimal eliminations.

7. Detailed Products

Nuclear-Powered Aircraft Carriers

Design, construction, and maintenance of nuclear-powered aircraft carriers for the US Navy

Amphibious Assault Ships

Design, construction, and maintenance of amphibious assault ships for the US Navy

Surface Combatants

Design, construction, and maintenance of surface combatants, including destroyers and cruisers, for the US Navy

Submarines

Design, construction, and maintenance of submarines for the US Navy

Unmanned Undersea Vehicles (UUVs)

Design, development, and production of UUVs for the US Navy

Cybersecurity and IT Services

Providing cybersecurity, IT, and engineering services to the US government and commercial customers

Nuclear and Environmental Services

Providing nuclear operations, maintenance, and decommissioning services, as well as environmental remediation services

Technical Solutions

Providing engineering, design, and technical services to the US government and commercial customers

8. Huntington Ingalls Industries, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Huntington Ingalls Industries, Inc. is medium due to the presence of alternative shipbuilding companies and the ability of customers to switch to other providers.

Bargaining Power Of Customers

The bargaining power of customers for Huntington Ingalls Industries, Inc. is low due to the company's strong relationships with the US Navy and other government agencies, which provides a stable source of revenue.

Bargaining Power Of Suppliers

The bargaining power of suppliers for Huntington Ingalls Industries, Inc. is medium due to the company's dependence on a few key suppliers for critical components and materials.

Threat Of New Entrants

The threat of new entrants for Huntington Ingalls Industries, Inc. is low due to the high barriers to entry in the shipbuilding industry, including the need for significant capital investment and specialized expertise.

Intensity Of Rivalry

The intensity of rivalry for Huntington Ingalls Industries, Inc. is high due to the competitive nature of the shipbuilding industry, with several established players vying for contracts and market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 39.51%
Debt Cost 4.45%
Equity Weight 60.49%
Equity Cost 6.95%
WACC 5.96%
Leverage 65.31%

11. Quality Control: Huntington Ingalls Industries, Inc. passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Huntington Ingalls

A-Score: 5.3/10

Value: 4.7

Growth: 4.2

Quality: 5.0

Yield: 4.0

Momentum: 7.0

Volatility: 7.0

1-Year Total Return ->

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Stock-Card
Curtiss-Wright

A-Score: 5.2/10

Value: 1.2

Growth: 6.1

Quality: 6.9

Yield: 0.0

Momentum: 9.0

Volatility: 8.0

1-Year Total Return ->

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Stock-Card
Woodward

A-Score: 5.0/10

Value: 1.1

Growth: 5.6

Quality: 6.7

Yield: 0.0

Momentum: 9.0

Volatility: 7.7

1-Year Total Return ->

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Stock-Card
Textron

A-Score: 4.9/10

Value: 5.5

Growth: 5.9

Quality: 5.2

Yield: 0.0

Momentum: 4.0

Volatility: 8.7

1-Year Total Return ->

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Stock-Card
BWXT

A-Score: 4.7/10

Value: 0.2

Growth: 6.3

Quality: 5.3

Yield: 1.0

Momentum: 9.5

Volatility: 5.7

1-Year Total Return ->

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Stock-Card
Axon Enterprise

A-Score: 4.6/10

Value: 0.0

Growth: 9.6

Quality: 5.1

Yield: 0.0

Momentum: 9.0

Volatility: 4.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

309.9$

Current Price

309.9$

Potential

-0.00%

Expected Cash-Flows