Why Defense Company Huntington Ingalls Shares Are Diving Today

Zinger Key Points
  • Ingalls Shipbuilding reports Q1 revenue increase of 4.9% Y/Y to $2.81 billion.
  • Operating income rose by 9.2% Y/Y with margin enhancement, reflecting effective cost management.

Huntington Ingalls Industries Inc HII shares are trading lower after it reported first-quarter FY24 results.

Sales and service revenue increased 4.9% Y/Y to $2.81 billion, beating the consensus of $2.79 billion.

Revenues by segments: Ingalls Shipbuilding $655 million (+13.5% Y/Y), Newport News Shipbuilding $1.43 billion (-4.8% Y/Y) and Mission Technologies $750 million (+20.2% Y/Y).

EPS of $3.87, up 19.8% Y/Y, beat the consensus of $3.49

Operating income increased 9.2% Y/Y to $154 million, and the margin expanded by 22 bps Y/Y to 5.5%.

Segment operating income was $170 million (+9.0% Y/Y), and the margin was 6.1%, up 23 bps Y/Y.

Huntington Ingalls's operating cash flow for the quarter totaled $202 million and a negative free cash flow of $274 million.

New contract awards for 2023 were $3.1 billion, with a total backlog of around $48.4 billion as of March 31, 2024.

“Strong growth in Mission Technologies and stable shipbuilding progress provide a solid foundation for the balance of 2024 and beyond.” said Chris Kastner, president and CEO. 

FY24 Outlook Reiterated: Huntington Ingalls Industries sees Shipbuilding revenue of $8.8 billion-$9.1 billion and the corresponding operating margin of 7.6%-7.8%.

Huntington Ingalls sees Mission Technologies’ revenue of $2.70 billion – $2.75 billion, with an operating margin of 3.0%-3.5% and Mission Technologies EBITDA margin of 8.0%-8.5%.

Huntington Ingalls Industries expects FY24 free cash flow of $600 million-$700 million.

The company continues to expect FY24-FY28 free cash flow of $3.6 billion.

Investors can gain exposure to the stock via Global X Funds Global X Defense Tech ETF SHLD and First Trust Exchange-Traded Fund First Trust Indxx Aerospace & Defense ETF MISL.

HII Price Action: Huntington Ingalls shares are down 11.03% at $246.35 at the last check Thursday. 

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Photo: Courtesy Huntington Ingalls

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