Huntington Ingalls (HII) Misses Q3 Earnings On Lower Sales

Huntington Ingalls Industries' (NYSE:HII) third-quarter 2016 adjusted earnings of $2.27 per share missed the Zacks Consensus Estimate of $2.39 by 5%.

Reported earnings also declined 3.4% from $2.35 per share in the year-ago quarter. The downside was primarily due to lower contribution from its Newport News Shipbuilding and Ingalls Shipbuilding divisions.

Total Revenue

Total revenue in the third quarter was $1,683 million, below the Zacks Consensus Estimate of $1,731 million. The top line also declined 6.5% from the year-ago figure of $1,800 million.

Segment Details

Newport News Shipbuilding: Segment revenues were $1,072 million, down 8.9% year over year due to lower sales in Aircraft Carriers and Submarines. Operating income declined 21% owing to lower risk retirement on the VCS program, as well as the resolution of outstanding contract changes on the CVN-71 USS Theodore Roosevelt RCOH in the third quarter of 2015.

Ingalls Shipbuilding: Segment revenues were $577 million, down 2.7% year over year due to lower revenues in Amphibious Assault Ships and the Legend-class National Security Cutter (NSC) programs, partially offset by higher revenues in Surface Combatants. Operating income at the segment decreased 14.3%, thanks to lower risk retirement on the LHA-6 America-class program.

Other: Segment revenues were $33 million, up 10% year over year. The segment incurred an operating loss of $5 million, in line with the year-ago loss figure.

Backlog

The company received new orders worth $1.2 billion and exited the quarter with a total backlog of $2 billion.

Financial Update

Cash & cash equivalents as of Sep 30, 2016, were $957 million, up from $894 million as of Dec 31, 2015.

Long-term debt, as of Sep 30, 2016, was $1,277 million, slightly above the 2015-end level of $1,273 million.

Cash from operating activities in the first nine months of 2016 was $477 million, compared with $428 million in the year-ago period.

Acquisition & Dividend Update

Huntington Ingalls recently entered into a definitive agreement to acquire Camber Corporation, a government services company headquartered in Huntsville, AL; to diversify its revenue stream. The buyout has been approved by Huntington Ingalls’ board of directors. It is expected to close by the year end, subject to certain regulatory approvals and customary closing conditions. Concurrent with the news of the acquisition, Huntington Ingalls announced that it has raised its quarterly dividend to 60 cents per share, up 20% from the previous payout of 50 cents.

Other Defense Releases

The Boeing Company’s (NYSE:BA) third-quarter 2016 adjusted earnings of $3.51 per share surpassed the Zacks Consensus Estimate of $2.62 by 34%. Reported earnings also improved 39.3% from the year-ago figure of $2.52 per share.

Northrop Grumman Corporation (NYSE:NOC) reported third-quarter 2016 adjusted earnings of $3.02 per share that beat the Zacks Consensus Estimate of $2.81 by 7.5%. Reported earnings were also up 25.3% from $2.41 recorded in the year-ago quarter.

Lockheed Martin Corp. (NYSE:LMT) reported third-quarter 2016 earnings of $3.61 per share, which surpassed the Zacks Consensus Estimate of $2.86 by 26.2%. Earnings also increased 49.2% from the year-ago level.

Zacks Rank

Huntington Ingalls currently has a Zacks Rank #3 (Hold). You can seethe complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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