Huntington Ingalls Industries Inc

Huntington Ingalls Industries, Inc. (NYSE: HII) is a global, all-domain defense provider. The Company delivers ships and all-domain solutions in service of the nation. It delivers critical capabilities extending from ships to unmanned systems, cyber, ISR, AI/ML and synthetic training. It operates through three segments: Ingalls Shipbuilding (Ingalls), Newport News Shipbuilding (Newport News), and Mission Technologies.

Key Business & Financial Updates

• Third Quarter Financial Overview: In the third quarter of 2024, the company reported revenues of USD 2.7 billion, representing a 2.4% decline compared to the same period in 2023. This decrease was primarily due to lower volumes at Ingalls Shipbuilding and Newport News Shipbuilding, partially offset by growth in the Mission Technologies segment. Net earnings for the quarter totaled USD 101 million, translating to diluted earnings per share of USD 2.56, compared to USD 148 million and USD 3.70 per diluted share in the third quarter of 2023.
• Operational Performance: Operating income for Q3 2024 was USD 82 million, reflecting an operating margin of 3.0%, a decline from USD 172 million and 6.1% operating margin in the prior year. The decrease in operating income was mainly driven by lower segment operating income, particularly in the shipbuilding segments. Segment operating income for Q3 2024 was USD 97 million with a segment operating margin of 3.5%, compared to USD 187 million and 6.6%, respectively, in Q3 2023. The performance at Newport News Shipbuilding, which included an unfavorable cumulative adjustment of USD 78 million, along with weaker results at Ingalls Shipbuilding, contributed to these declines.
• Cash Flow and Contract Awards: Net cash provided by operating activities in Q3 2024 was USD 213 million, while free cash flow for the quarter amounted to USD 136 million, compared to USD 335 million and USD 293 million, respectively, in the prior year. The company secured new contract awards totaling USD 3.6 billion in Q3 2024, bringing its total backlog to approximately USD 49.4 billion as of September 30, 2024. Notably, the awards included a USD 565 million multi-ship amphibious contract at Ingalls Shipbuilding.
• Outlook: The company has updated its fiscal 2024 outlook, while withdrawing its five-year free cash flow projection. Further details on the revised expectations will be provided in subsequent reports.

Technical Observation (on the daily chart):

The Relative Strength Index (RSI) over a 14-day period stands at a value of 32.05, recovering from oversold zone, with the price taking reversal from an important support zone of USD 170.00-USD 180.00, with expectations of some support if these levels sustain. Additionally, the stock's current positioning is below both 50-Day SMA and 200-Day SMA, which can act as a short to medium term resistance levels.

As per the above-mentioned price action, momentum in the stock over the last month, current macroeconomic scenarios, recent business & financial updates, and technical indicators analysis, a ‘BUY’ rating has been given to Huntington Ingalls Industries, Inc. (NYSE: HII) at the current market price of USD 193.61 as of November 21, 2024, at 08:10 am PST. 

Individuals can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario. 

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc. 

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance level is November 21, 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level that the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.s

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the New York Stock Exchange (NYSE), NASDAQ Capital Markets (NASDAQ), and or REFINITIV. Typically, all sources (NYSE, NASDAQ, or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.