Huntington Ingalls Industries, Inc. HII is slated to report second-quarter 2015 results on Aug 6, 2015 before the market opens. Last quarter, the company had posted a negative earnings surprise of 31.07%. Let’s see how things are turning out for the second quarter.
Factors at Play
The largest military shipbuilder in the U.S., Huntington Ingalls is the prime industrial employer in Virginia. Huntington Ingalls is the sole designer and manufacturer of nuclear powered aircraft carriers in the U.S. Over 70% of the active U.S. Navy fleet consists of Huntington Ingalls ships.
During the quarter, Huntington Ingalls received a Naval Sea Systems Command award under which it has received a couple of contracts worth $4.29 billion for the planned second Gerald R. Ford-class aircraft carrier — John F. Kennedy (CVN-79).
On the flipside, UniversalPegasus, a wholly owned subsidiary of Huntington Ingalls, continues to be affected by the prolonged weakness in the oil and gas market. In the absence of a favorable turn in the market, the company foresees pressure in the business to linger.
Earnings Whispers
Our proven model does not conclusively show that Huntington Ingalls is likely to beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Huntington Ingalls has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at $2.09 per share.
Zacks Rank: Huntington Ingalls carries a Zacks Rank #3 (Hold), which increases the predictive power of ESP. However, when combined with a 0.00% ESP, surprise prediction becomes difficult.
We caution against Sell-rated stocks (Zacks Rank #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Peer Releases
General Dynamics Corporation GD announced second-quarter 2015 earnings from continuing operations of $2.27 per share, comfortably surpassing the Zacks Consensus Estimate of $2.03 by 11.8%. Earnings also increased 20.7% from the prior-year figure of $1.88, backed by improved operating margins.
Pentagon’s prime contractor, Lockheed Martin Corp. LMT posted second-quarter 2015 earnings of $2.94 per share, comfortably surpassing the Zacks Consensus Estimate of $2.67 by 10.1%. Earnings also jumped 6.5% from $2.76 per share a year ago.
Northrop Grumman Corp.’s NOC second-quarter 2015 adjusted earnings came in at $2.47 per share, 6% higher than the Zacks Consensus Estimate of $2.33.
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