UPDATE: Bank Of America Downgrades Huntington Ingalls Industries As Stock Approaches Fair Value
In a report published Thursday, Bank of America analyst Ronald J. Epstein downgraded the rating on Huntington Ingalls Industries (NYSE: HII) from Buy to Neutral, but raised the price target from $102.00 to $106.00.
In the report, Bank of America noted, “Huntington Ingalls' stock is approaching fair value and there is limited upside from current levels, in our opinion. The stock is up 11% YTD versus the S&P 500, which has appreciated 2%. In our view, the stock price already incorporates the company's recent improvement in margins and the more constructive fundamental outlook following the Bipartisan Budget Deal of 2013. With the margin expansion story played out, HII is more in line with other defense companies, which we value on cash flow generation with a DCF valuation.
"Using a DCF valuation method, we arrive at a $106 price objective for HII (vs. $102 previously). Previously, we were valuing the company using relative valuation with P/E multiples. At current levels, there is only a 4% upside potential to our PO, leading to a rating change to Neutral.”
Huntington Ingalls Industries closed on Wednesday at $101.70.
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