Huntington Ingalls Tops Expectations as Q1 Profits Jump 33 Percent

Andrew Klips |

Huntington Ingalls Industries, Inc. (HII), the parent company of Newport News Shipbuilding and recent Fortune 500 addition, reported steady growth in first quarter earnings due to better profit margin, while sales were essentially flat.

For the quarter, the Virginia-based defense giant that was spun out of Northrop Grumman (NOC) reported revenue of $1.562 billion, compared to $1.568 billion in the first quarter of 2012. Profits for the quarter totaled $44 million, or 87 cents per share, up from $33 million, or 67 cents per share, in the same quarter last year.

Analysts were expecting the company to report earnings of 86 cents per share on revenue of $1.6 billion.

Segment operating income improved to $120 million from $101 million in the same period last year while total operating income for the quarter was $95 million, compared to $80 million last year.

Revenue from Ingalls shipbuilding decreased 8.8 percent from $692 million to $631 million in the first quarter due to lower sales in amphibious assault programs. Newport News shipbuilding sales offset most of those declines with an increase from $895 million last year to $950 million in the recent quarter.

Operating margins in the Ingalls segment improved from 2.9 percent to 4.1 percent while margins at Newport News grew 84 basis points to 9.9 percent. Overall operating margin increased from 5.1 percent to 6.1 percent.

$3.2 billion in new contracts were penned during the first quarter, mainly comprised of jobs related to the CVN-72 USS Abraham Lincoln and CVN-79 John F. Kennedy.

"Even with the continued uncertainty surrounding the defense budget, HII continues to garner support for its programs through alignment with the Navy's priorities and is focused on driving performance to our goal of 9-plus percent operating margin by 2015," said Mike Petters, president and chief executive at Huntington Ingalls.

The company has done well amidst government budget cuts because of its relationship with the Navy and the U.S. government’s commitment to bolster its presence in the Pacific. Huntington Ingalls is the largest military shipbuilder in the U.S. and employees more than 37,000 people across Virginia, Mississippi, Louisiana and California.

The company went public in 2011 and this year made the Fortune 500 list for the first time, ranking #380 with $6.7 billion in annual revenue.

Shares of HII have appreciated by nearly 40 percent in the past 52 weeks through Tuesday’s close at $54.00. A part of those gains are being relinquished in early action on Wednesday as investors appear focused on the revenue miss rather than the earnings beat that could be signaling a slowdown in growth.

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Companies

Symbol Name Price Change % Volume
HII Huntington Ingalls Industries Inc. 153.00 -1.81 -1.17 31,080
NOC Northrop Grumman Corporation 214.36 -3.54 -1.62 278,267
SLP Simulations Plus Inc. 8.60 -0.16 -1.83 16,496

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