Will Newport News Drive Huntington Ingalls (HII) Q4 Earnings?

Huntington Ingalls Industries, Inc. (NYSE:HII) is set to report fourth-quarter and 2019 results on Feb 13, before market open.

In the last reported quarter, the company delivered a positive earnings surprise of 3.03%.

Growth in its Newport News division is likely to have boosted the company’s overall top-line performance in the quarter to be reported.

Let’s discuss the factors influencing Huntington Ingalls’ fourth-quarter results.

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.

We expect this division to have witnessed solid revenue growth in the fourth quarter, led by increased volumes of aircraft carrier construction, submarine construction, aircraft carrier RCOH programs and Navy nuclear support services.

The Zacks Consensus Estimate for fourth-quarter revenues at Newport News is pegged at $1,328 million, implying a 3.9% improvement from the year-ago quarter’s reported figure.

Interestingly, with all of Huntington Ingalls’ segments reflecting favorable top-line guidance for the fourth quarter, we are optimistic about the company’s overall top-line performance. Notably, the Zacks Consensus Estimate for the company’s fourth-quarter revenues stands at $2.34 billion, suggesting an increase of 6.4% from the year-earlier quarter’s reported figure.

Other Factors at Play

Huntington Ingalls is expected to continue incurring significant expenses related to the damage of its DDG 119 Delbert D. Black ship in March 2019. As the ship is expected to get delivered in the first half of 2020, the reconstruction must have led to additional costs for exterior structural repairs. This is likely to have dampened the company’s bottom line in the fourth quarter.

Considering these factors, the consensus mark for fourth-quarter earnings is pegged at $4.24 per share, calling for a decline of 14.2% from the figure reported in the year-ago period.

Huntington Ingalls Industries, Inc. Price and EPS Surprise

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 that is not the case here.

Huntington Ingalls has an Earnings ESP of -1.77% and a Zacks Rank #4 (Sell). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

A Stock to Consider

Here is a defense company you may want to consider, as our model shows that it has the right combination of elements to post an earnings beat this quarter:

Heico Corporation (NYSE:HEI) is expected to release fiscal 2020 first-quarter results soon. The company has an Earnings ESP of +8.94% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Recent Defense Releases

Teledyne Technologies Inc. (NYSE:TDY) reported fourth-quarter 2019 adjusted earnings of $2.90 per share, which surpassed the Zacks Consensus Estimate of $2.76 by 5.1%. The bottom-line figure came above the guided range of $2.71-$2.76 for the reported quarter.

Lockheed Martin Corp. (NYSE:LMT) reported fourth-quarter 2019 earnings of $5.29 per share, which surpassed the Zacks Consensus Estimate of $4.99 by 6%. The bottom line also improved 20.5% from $4.39 in the year-ago quarter.

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