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Is a Beat in Store for Huntington Ingalls (HII) Q1 Earnings?

Zacks Equity Research

Huntington Ingalls Industries, Inc. HII is set to report first-quarter 2020 results on May 7, before market open.

This military shipbuilder has missed the Zacks Consensus Estimate in two of the trailing four quarters and missed in the remaining two, the average negative surprise being 5.19%.

The company’s Newport News segment is likely to reflect rising demand for aircraft carriers and submarine support services in the upcoming quarterly results.

Let’s discuss the factors influencing Huntington Ingalls’ first-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.

Over the last few quarters, the company’s Newport News division has generated higher revenues, primarily driven by increased volumes in aircraft carrier construction and aircraft carrier RCOH programs, and higher Navy nuclear support services. We expect this trend to have continued and ultimately boosted this segment’s revenue growth in the first quarter.

The Zacks Consensus Estimate for first-quarter revenues at Newport News is pegged at $1,331 million, implying a 5.2% improvement from the year-ago quarter’s reported figure.

Other Growth Drivers

The company has been making strategic investments within its Ingalls Shipbuilding division that has enabled the unit to secure certain key contracts over the last few quarters. Such notable contract wins are expected to have boosted this unit’s backlog in the soon-to-be-reported quarter.

In February 2020, the Ingalls Shipbuilding division successfully delivered amphibious assault ship Tripoli (LHA 7) to the U.S. Navy, which is likely to have contributed favorably to the segment’s quarterly revenues.

In line with this, the Zacks Consensus Estimate for first-quarter revenues at its Ingalls Shipbuilding division is pegged at $591 million, indicating a 1.2% improvement from the figure reported in the year-ago quarter.

Interestingly, with a majority of Huntington Ingalls’ segments reflecting favorable top-line guidance for the first quarter, we are optimistic about its overall top-line performance. Notably, the Zacks Consensus Estimate for the company’s first-quarter revenues stands at $2.11 billion, suggesting an increase of 1.6% from the year-earlier quarter’s reported figure.

The company is expected to have witnessed improved margin performance, while it focuses on reducing capital expenditures. Such solid operational performance along with revenue growth expectations is projected to have boosted the company’s bottom line as well. The Zacks Consensus Estimate for first-quarter earnings per share is pegged at $4.47, implying an annual surge of 56.8%.

Toward the end of the first quarter, Huntington Ingalls completed the acquisition of Hydroid Inc., a leading provider of advanced marine robotics to the defense and maritime markets. We expect further updates on the acquisition along with the soon-to-be-reported quarterly results.

Huntington Ingalls Industries, Inc. Price and EPS Surprise

Huntington Ingalls Industries, Inc. Price and EPS Surprise

Huntington Ingalls Industries, Inc. price-eps-surprise | Huntington Ingalls Industries, Inc. Quote

What the Zacks Model Unveils

Our proven model predicts 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.

Earnings ESP: The company’s Earnings ESP is +1.79%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Huntington Ingalls carries a Zacks Rank #3, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Another Stock to Consider

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

Spirit Aerosystems Holdings, Inc. SPR is scheduled to report first-quarter 2020 earnings on May 6. It has an Earnings ESP of +18.35% and a Zacks Rank #3.

Recent Defense Releases

Lockheed Martin Corp. LMT reported first-quarter 2020 earnings of $6.08 per share, which surpassed the Zacks Consensus Estimate of $5.76 by 5.5%. The bottom line also improved 1.5% from the year-ago quarter’s $5.99.

Teledyne Technologies Inc. TDY reported first-quarter 2020 earnings of $2.28 per share, which surpassed the Zacks Consensus Estimate of $2.10 by 8.6%. The bottom line also improved 12.9% from the year-ago quarter’s $2.02.

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