UPDATE: Drexel Hamilton Initiates Huntington Ingalls Industries with Hold on Valuation and Pension Cost Concerns

Drexel Hamilton initiated its coverage on Huntington Ingalls Industries HII with a Hold rating on valuation concerns. Drexel Hamilton commented, "The market sees the potential for strong earnings growth from margin recovery at the Ingalls unit, pushing the shares up over 20% year to date and valuation (forward P/E) to levels roughly inline with the S&P 500. However, we are concerned that the potential for incremental program charges are still present, as well as higher than expected pension in 2013, though cash contributions may ameliorate some of this. That said, our biggest concern currently is valuation, as our calculated upside using a 13x forward P/E is roughly inline with current trading levels. We would likely get more positive on the shares on weakness, on demonstrated progress on low-margin programs, or on further 2013 pension clarity." Huntington Ingalls Industries closed at $40.24 on Monday.