Analyst Note| Burkett Huey, CFA |
Narrow-moat-rated Huntington Ingalls reported a decent third quarter as materials shortages somewhat delayed contract progress. Revenue of $2.3 billion missed FactSet consensus by 1.9%, but EPS of $3.65 beat FactSet consensus by 22.1%. The earnings beat was not a high-quality earnings beat, though, as the major driver of the beat was the recognition of additional R&D tax credits for prior years and is unlikely to recur. We are reducing our fair value estimate to $195 from $196 as we slightly reduce our near-term shipbuilding revenue forecast to account for materials shortages.