Huntington Ingalls Reports Q4 Earnings Miss, Stock Drops 10.7%

Key Points:

* Revenue: $3.00 billion, missing analyst estimates of $3.06 billion (5.4% year-over-year decline)
* Earnings Per Share (GAAP): $3.15, below analysts' consensus of $3.53 (10.8% miss)
* Operating Margin: 3.7%, down from 9.8% in Q4 2023
* Free Cash Flow Margin: 9.2%, down from 13.7% in Q4 2023
* Backlog: $48.7 billion, up 1.2% year-over-year
* Market Capitalization: $7.65 billion

Company Overview:

Huntington Ingalls (NYSE: HII) is an aerospace and defense company that develops and builds Nimitz-class aircraft carriers, marine vessels, and mission systems.

Sales Growth:

Despite geopolitical tensions and increased defense spending, Huntington Ingalls' long-term sales growth has been tepid at 5.3% CAGR over the past five years.

Backlog:

While the backlog has grown to $48.7 billion, it has not kept pace with revenue growth, indicating the company may not secure enough new orders to maintain growth in the future.

Profitability:

Huntington Ingalls' operating margin has declined to 3.7% in Q4, a 6.2 percentage point decrease year-over-year. Additionally, its trailing 12-month EPS fell to $3.15, missing analyst estimates.

Analysts' Expectations:

Analysts project a modest 4.1% revenue growth over the next 12 months, suggesting that the company's new products and services are yet to drive better top-line performance.

Investment Considerations:

Given the missed earnings, declining profitability, and underwhelming revenue outlook, investors may want to evaluate the company's long-term growth prospects and valuation before making an investment decision.