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Huntington Ingalls Industries Inc HII

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Morningstar’s Analysis

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Materials Shortages Slow Progress at Huntington Ingalls in Q3; Slightly Lowering FVE

Burkett Huey, CFA Equity Analyst

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.

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Company Profile

Business Description

Huntington Ingalls Industries was created from the spin-off of Northrop Grumman’s shipbuilding business. The company is the largest independent military shipbuilder. The company has three segments, two of which are shipyards. Ingalls produces non-nuclear-powered ships, particularly the America-class amphibious assault ship and the Arleigh Burke-class destroyer. The Newport News segment produces nuclear-powered ships, is the sole-source contractor for the Gerald R. Ford-class aircraft carrier, and is a major subcontractor to the Columbia-class attack submarine. The company’s technical solutions segment produces uncrewed undersea vehicles as well as provides various IT services for the government.

Contact
4101 Washington Avenue
Newport News, VA, 23607
T +1 757 380-2000
Sector Industrials
Industry Aerospace & Defense
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Cyclical
Employees 44,000