On Wednesday, BofA Securities revised its price target for Huntington Ingalls Industries (NYSE:HII), a major shipbuilding company, reducing it from $250 to $195. The firm maintained its Underperform rating on the stock. The adjustment follows Huntington Ingalls' announcement of an adjusted earnings per share (EPS) miss and a lowered forecast for 2024.
Huntington Ingalls has faced challenges that have impacted its performance, including unfavorable contracts that predate the COVID-19 pandemic, a workforce that lacks experience, and ongoing supply chain delays. These factors have contributed to the company's inability to meet expectations in its shipbuilding division, despite having a clear view of naval demand from the U.S. government's 30-year shipbuilding plan.
In response to these setbacks, Huntington Ingalls has been exploring new contracting methods and implementing fresh hiring strategies. These efforts are aimed at improving the company's performance and overcoming the current hurdles that have hampered progress at its shipyards.
However, according to BofA Securities, these initiatives have yet to yield significant results that would counterbalance the ongoing underperformance. As a consequence, the firm has reiterated its Underperform rating for Huntington Ingalls and adjusted the price objective downward to reflect the company's recent difficulties and revised outlook.
The new price target of $195 represents BofA Securities' current valuation of Huntington Ingalls based on the updated financial projections and the challenges the company faces in the near term.
In other recent news, Huntington Ingalls Industries (HII) reported a decrease in third-quarter earnings for 2024, with earnings per share dropping to $2.56 from $3.70 in the previous year. HII's revenue also saw a 2.4% year-on-year decline to $2.7 billion. Despite these setbacks, HII announced a significant $9.6 billion contract for amphibious warships, boosting its backlog to $49.4 billion.
In a notable leadership transition, Kari Wilkinson will assume the role of president of HII's Newport News Shipbuilding division from January 1, 2025, succeeding Jennifer Boykin.
TD Cowen downgraded HII from Buy to Hold due to persistent shipbuilding execution challenges, reducing the price target for HII to $180 from the previous $290.
HII also secured a $197 million contract to enhance U.S. Army combat vehicles through its Mission Technologies division. This development forms part of the recent initiatives HII has undertaken, which also include anticipation of submarine contract agreements in late 2024 and plans to consolidate Mission Technologies to enhance competitiveness and reduce costs.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Huntington Ingalls Industries' financial position and market performance. Despite the challenges highlighted in BofA Securities' analysis, HII maintains a P/E ratio of 11.54, which is relatively low compared to its near-term earnings growth potential. This valuation metric, along with a market capitalization of $8.01 billion, suggests that investors may be pricing in the company's current difficulties.
InvestingPro Tips reveal that HII has raised its dividend for 13 consecutive years, demonstrating a commitment to shareholder returns even in the face of operational challenges. This consistent dividend growth, currently yielding 2.64%, may provide some support for the stock price. However, it's worth noting that the stock has experienced a significant decline, with a 21.78% drop in the past three months, aligning with the concerns raised in the article about the company's recent performance.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips that could provide valuable insights into HII's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.