Huntington Ingalls Raises Shipbuilding Outlook as Earnings Climb
Diluted earnings increased 36.5% to $5.27 a share in the second quarter.
Huntington Ingalls Industries (HII), the military shipbuilder, raised its full-year shipbuilding revenue outlook to between $10.2 billion and $10.4 billion after stronger aircraft-carrier, submarine and amphibious-assault-ship volume lifted second-quarter results.
The quarter marked a step up from the start of the year even as year-over-year revenue growth eased. Revenue increased 10.9%, slowing from 13.4% growth in the first quarter, while operating margin widened sequentially to 6.1% from 5.0%.
Revenue rose to $3.418 billion from a year earlier and increased $319 million from the first quarter. Net earnings climbed 36.8% to $208 million, while operating income advanced 28.8% to $210 million.
Product sales accounted for most of the growth, rising $314 million to $2.271 billion, while service revenue increased $22 million to $1.147 billion. Segment operating income grew 30.2% to $224 million, and the combined segment margin expanded to 6.6% from 5.6% in the preceding quarter.
Newport News Shipbuilding led the advance as revenue rose 15.3% to $1.849 billion on higher aircraft-carrier and submarine volume. Operating income increased 35.4% to $111 million, and margin widened to 6.0% as contract adjustments, incentives and volume growth outweighed lower aircraft-carrier performance. Ingalls Shipbuilding revenue climbed 16.7% to $845 million on higher amphibious-assault-ship volume, though its margin narrowed to 6.9% from a year earlier.
Mission Technologies moved in the opposite direction on sales, with revenue declining 3.9% to $760 million as lower All-Domain Operations and Global Security volume outweighed gains elsewhere. Its operating income still rose 52.8% to $55 million, helped by higher equity income from nuclear and environmental joint ventures and lower purchased-intangible amortization. The segment's margin expanded to 7.2%, and its EBITDA margin reached 10.1%.
Huntington Ingalls also raised the low end of its shipbuilding operating-margin forecast, bringing the range to 6.0% to 6.5% from 5.5% to 6.5%. It continues to expect Mission Technologies revenue of $3.0 billion to $3.2 billion, a segment operating margin of about 5% and an EBITDA margin of 8.4% to 8.6%.
Contract awards increased to $6.7 billion from $4.0 billion in the first quarter, lifting backlog to $57.3 billion. Cash conversion remained the counterweight: first-half free cash flow fell to negative $611 million from positive $268 million a year earlier, though the company maintained its full-year free-cash-flow forecast of $500 million to $600 million.