Huntington Ingalls Shares Gain After Q2 Beat

Huntington Ingalls Industries Inc HII reported a second-quarter sales and service revenue increase of 19.3% year-over-year to $2.662 billion, beating the consensus of $2.62 billion.
Revenue growth was driven by revenue attributable to the acquisition of Alion Science and Technology in 3Q21 and growth at Newport News Shipbuilding.
EPS was $4.44, beating the consensus of $3.35.
The operating income increased by 49.2% Y/Y to $191 million, and the margin expanded by 144 bps to 7.2%.
Segment operating income was $225 million (+33.1% Y/Y), and the margin expanded by 88 bps to 8.5%.
Revenues by segments: Ingalls Shipbuilding $658 million (-1.8% Y/Y), Newport News Shipbuilding $1.43 billion (+5.1% Y/Y), and Mission Technologies $600 million (+153.2% Y/Y).
Segment operating margins: Ingalls Shipbuilding 16.1% (up 417 bps), Newport News Shipbuilding 6.6% (up 98 bps), and Mission Technologies 4.2% (down 132 bps).
Huntington Ingalls generated cash from operating activities year-to-date of $184 million compared to $139 million a year ago. Free cash flow was $82 million.
New contract awards in Q2 were ~$2 billion, and the backlog was ~$47.2 billion as of June 30, 2022.
"We remain confident in the positioning of the business for long-term value creation given the tremendous volume of shipbuilding work we have secured in backlog and a Mission Technologies division that is poised for robust growth in markets of critical importance to our customers," commented CEO Chris Kastner.
FY22 Outlook: Huntington Ingalls Industries expects Shipbuilding revenue of ~$8.2 billion - $8.5 billion, Shipbuilding operating margin of 8.0% - 8.1%.
It expects Mission Technologies revenue of ~$2.4 billion - $2.6 billion (prior ~$2.6 billion), the corresponding segment operating margin of ~2.5%, and EBITDA margin of 8.0% - 8.5%.
The company expects a Free Cash Flow of $300 million - $350 million.
Price Action: HII shares traded higher by 5.51% at $230.73 during the market session on Thursday.

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