Will Contract Wins Boost Huntington Ingalls (HII) Q3 Earnings?

Huntington Ingalls Industries, Inc. (NYSE:HII) is set to report third-quarter 2018 results on Nov 8, before market open.

In the last reported quarter, this military shipbuilder delivered a positive earnings surprise of 28.27%. Coming to expectations for the to-be-reported quarter, rising demand for aircraft carriers are likely to boost the company’s Newport News segment.

Let’s discuss the factors influencing Huntington Ingalls’ quarterly results, in brief.

Newport News Segment – A Key Catalyst

Huntington Ingalls’ Newport News is the nation's sole designer, builder and refueler of nuclear-powered aircraft carriers. Notably, this division generates more than 50% of the company’s total revenues. Increasing geo-political tensions across the globe have prompted the U.S. government to strengthen its arsenal, with aircraft carriers being a notable part of that.

Weexpect the upcoming quarterly result to duly reflect solid revenue growth from the Newport News segment. This is because higher volume for aircraft carriers and submarine support services have been driving this division’s top line over the past couple of quarters. Notably, at this segment, the Zacks Consensus Estimate for third-quarter revenues is pegged at $1,114 million, reflecting an annual improvement of 5.8%.

Order Growth – A Boon

A steady inflow of orders from the Pentagon has always provided an impetus to Huntington Ingalls’ quarterly results. Keeping this trend alive, the company won a string of notable contracts like the $5.1 billion multi-year deal for manufacturing six DDG 51 class ships. It also won a $180-million contract for performing complex overhaul (RCOH) work on USS John C. Stennis (CVN 74) and a $104-million modification contract related to nuclear submarines.

Such order growth tends to significantly boost revenues of major defense contractors like Huntington Ingalls. In sync with this, the Zacks Consensus Estimate for third-quarter revenues stands at $1.92 billion, mirroring 3.3% increase year over year.

The company’s bottom-line performance is also likely to be driven by such contract wins. Considering the contracts that Huntington Ingalls won during the third quarter, the consensus estimate for third-quarter earnings is pegged at $4.14 per share, reflecting an annual improvement of 26.6%.

What Our Quantitative Model Predicts

Huntington Ingalls does not possess the right combination of two ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — that increases the odds of an earnings beat in the third quarter.

Earnings ESP: Huntington Ingalls has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recent Defense Release

Aerojet Rocketdyne Holdings, Inc. (NYSE:AJRD) reported third-quarter 2018 adjusted earnings of 42 cents per share, surpassing the Zacks Consensus Estimate of 30 cents by 40%. Its total backlog at the end of the third quarter was $3.7 billion, which came slightly lower than $3.9 billion at the end of second quarter.

Curtiss-Wright (NYSE:CW) reported third-quarter 2018 adjusted earnings of $1.70 per share, which outpaced the Zacks Consensus Estimate of $1.58 by 7.6%. The company’s revenues of $595.4 million increased 5% year over year.

FLIR Systems’ (NASDAQ:FLIR) third-quarter 2018 adjusted earnings of 57 cents per share came in line with the Zacks Consensus Estimate. Its revenues declined 6.4% year over year to $434.9 million.

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