Yahoo Finance Huntington Ingalls Industries Inc (HII) (Q1 2024) Earnings Call Transcript Highlights: ...
Revenue: $2.8 billion, a 4.9% increase from the previous year.
Net Income: $153 million, up from $129 million in Q1 2023.
Earnings Per Share (EPS): $3.87, increased from $3.23 in the same quarter last year.
Backlog: $48.4 billion, with $27 billion funded.
New Contract Awards: $3.1 billion during the quarter.
Free Cash Flow: Negative $274 million for the quarter.
Operating Income: $154 million, a 9.2% increase from Q1 2023.
Operating Margin: 5.5%, compared to 5.3% in the previous year.
Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Record first quarter revenue of $2.8 billion, a 4.9% increase compared to the same period last year, driven by growth at Mission Technologies and Ingalls.
Diluted earnings per share increased to $3.87, up from $3.23 in the first quarter of 2023.
New contract awards during the quarter totaled $3.1 billion, resulting in a backlog of $48.4 billion, of which $27 billion is currently funded.
Successful shipbuilding milestones including delivery of ships and submarines, and the integration of an Australian company into the Newport News shipbuilding supply chain.
Strong performance in Mission Technologies with first quarter revenue of $750 million, a 20% increase over the first quarter of 2023, and strategic contract wins worth hundreds of millions.
Negative Points
Operational challenges due to access to skilled manufacturing labor, impacting program schedules and costs.
Lower volumes in aircraft carriers and Virginia-class submarine programs at Newport News, leading to a revenue decrease of $72 million or 5% from the same period last year.
Shipbuilding operating margin in the first quarter was 6.8%, slightly behind the outlook provided for the quarter.
Negative free cash flow in the quarter of $274 million, compared to negative $49 million in the first quarter of 2023.
Ongoing labor challenges in the supply chain affecting major equipment deliveries and impacting ship erection schedules.
Q & A Highlights
Q: Where is CVN 79 at in terms of percent complete? A: Christopher D. Kastner - President, CEO & Director of Huntington Ingalls Industries, Inc. stated that CVN 79 is approximately 90% complete, progressing well with positive signs such as dead loads being fired off the ship.
Q: To hit the midpoint of the shipbuilding margin guide, it looks like you'll need second half margins about 150 basis points above the first half. Could you detail where that uplift comes from? A: Thomas E. Stiehle - Executive VP & CFO explained that the shape of the margin is backloaded due to milestones, with Q2 also expected to be a 7% quarter in shipbuilding. The anticipated ramp in the latter half of the year is driven by achieving these milestones.
Q: The Navy controller mentioned that the Navy can't simply buy its way out of programmatic challenges and delays, mainly driven by labor constraints. Could subsidies to shipbuilders help alleviate this? A: Christopher D. Kastner acknowledged that while subsidies could help, more critical is the targeted effort by the Navy and shipbuilders to invest in improving performance within the industrial base, supply chain, and labor force.
Q: Mission Technologies had strong sales in Q1. What's expected for the rest of the year? A: Thomas E. Stiehle noted that while Q1 was strong, they are maintaining a conservative annual guidance of $2.7 billion to $2.75 billion. The potential for better performance exists, but they prefer not to get ahead of themselves.
Q: With the milestones for shipbuilding being back-end loaded this year, how does this compare to last year in terms of visibility and execution? A: Thomas E. Stiehle remarked that the profile is very similar to 2023, with the expectation that milestones will be achieved by year-end, though there is risk on a couple of them.
Q: Could you discuss the current status of the Columbia-class issues with the work on the bow at Newport News and its impact on workflow? A: Christopher D. Kastner clarified that the specific issues that caused schedule delays are now behind them, and the focus is on completing the volume work on the bow, which is slightly ahead of the recovery plan.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
