What Happened?
Shares of aerospace and defense company Huntington Ingalls (NYSE:HII) jumped 9.9% in the afternoon session after the company reported second-quarter earnings and revenue that sailed past Wall Street forecasts, driven by strong contract awards and a record backlog. The shipbuilder's revenue climbed 3.5% to $3.08 billion, while its earnings per share landed at $3.86. Although the company's net income of $152 million declined from the previous year, it still comfortably surpassed analysts' projections. The strong performance stemmed from easing production snags at its shipyards and booming demand for submarines. Huntington Ingalls also secured $11.9 billion in new contracts during the quarter, which brought its total funded backlog to a record high of $56.9 billion. Furthermore, free cash flow surged to $730 million, a significant improvement from a negative figure a year ago.
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What Is The Market Telling Us
Huntington Ingalls’s shares are somewhat volatile and have had 10 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 9 months ago when the stock dropped 23.8% on the news that the company reported weak third-quarter earnings as its revenue and EPS missed Wall Street's estimates. The weak top line was a result of lower volume at Ingalls and Newport News Shipbuilding. Other challenges highlighted during the quarter include delays in the timing of a key submarine contract agreement with the Navy, which affected profitability and cash flow. Overall, this was a weaker quarter.
Huntington Ingalls is up 50.8% since the beginning of the year, and at $282.91 per share, has set a new 52-week high. Investors who bought $1,000 worth of Huntington Ingalls’s shares 5 years ago would now be looking at an investment worth $1,629.
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