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Huntington Ingalls Industries - $HII - Earnings Analysis: Strong backlog of approximately $48.7 billion.

By sagebytes in Technology —

Business Model

HII generates revenue primarily through shipbuilding and all-domain defense solutions.

Revenue Sources

  • Product sales (e.g., ships, unmanned systems)
  • Service revenues (e.g., cyber, ISR, AI/ML, synthetic training)

Income Statement Analysis

  • Sales and service revenues decreased by 5.4% due to lower volume at all segments.
  • Operating income decreased by 64.7% due to lower performance at Newport News Shipbuilding and prior year results included a favorable court judgment in Ingalls Shipbuilding and favorable insurance claim in Mission Technologies.
  • Diluted earnings per share decreased by 54.3%.

Balance Sheet Analysis

  • Total assets increased by approximately 8.3% due to increases in current assets, property, plant, and equipment, and other assets.
  • Total stockholders’ equity increased by approximately 14% primarily due to retained earnings.
  • Total liabilities increased by approximately 5%.

Cash Flow Analysis

  • Net cash provided by operating activities decreased due to changes in accounts receivable, contract assets, accounts payable, and retiree benefits.
  • Net cash used in investing activities increased due to capital expenditure additions.
  • Net cash provided by financing activities increased due to proceeds from issuance of long-term debt.
  • Cash and cash equivalents at the end of the period increased due to the factors above.

Capital Allocation

HII invested $353 million in capital expenditures (3.1% of sales), paid $206 million in dividends, and repurchased $162 million in shares during 2024. Company is focused on investing in yards, dividends, and returning excess cash to shareholders.

Management Commentary

We continue to make progress on ships put under contract pre-COVID, and are working diligently with our customers to put over $50 billion of new work under contract.

Mission Technologies continued its strong track record of top line growth and margin expansion and secured an impressive $12 billion in total future contract value during 2024.

Overall Sentiment: Focused on delivering ships and solutions in service of the nation. Confident about continued progress and improvement in productivity and throughput.

Recommendation

Rating: Hold

Reason for Rating: Hold rating due to ongoing challenges with pre-COVID contracts and the need for operational improvements to drive margin expansion. The company's long-term growth potential and strong backlog are positive factors, but near-term uncertainties warrant a cautious approach.

Disclaimer: This analysis is based on company filings and public information. It is for informational purposes only and not financial advice. Past performance does not guarantee future results. Investing in securities involves risks, including potential loss of principal. Always conduct your own research, understand the risks, and consult a financial professional before making investment decisions.

Generated on: 2/7/2025, 9:55:58 AM