From Seekingalpha · Seeking Profits · · 50s
Huntington Ingalls: Contract Mix Gains, But Gridlock Caps Growth
Huntington Ingalls improves margins but political gridlock limits stock upside.
In brief
Huntington Ingalls improves margins but political gridlock limits stock upside. Huntington Ingalls Industries' Q3 margins rose to 7.4% as legacy contracts rolled off, but defense spending constraints and political gridlock cap growth prospects. Originally reported by Seekingalpha.
Q3 Margin Expansion
Huntington Ingalls Industries reported 180 bps margin expansion to 7.4% in Q3, driven by legacy contract roll-off and operational improvements at Newport News Shipbuilding.
Growth Constraints
HII's revenue base is highly secure with 90% of shipbuilding revenue covered by contracts, but growth is capped by defense spending constraints and political gridlock.
Valuation and Guidance
Free cash flow guidance of $500M, $600M remains intact, the balance sheet is stable, and the 1.8% dividend is secure, but upside is limited and valuation is fair.
The headline
Huntington Ingalls Industries' Q3 margins rose to 7.4% as legacy contracts rolled off, but defense spending constraints and political gridlock cap growth prospects.
