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Huntington Ingalls Hits 52-Week High on Analyst Upgrade

Shares of Huntington Ingalls Industries, Inc. HII reached a 52-week high of $142.15 on Apr 12. In fact, the largest military shipbuilder in the U.S. has seen its stock price climb about 11.4% so far this year, outperforming the S&P 500 peer group average of 0.87% over the same time frame.

Why this Bullishness?

On Apr 12, analysts at Goldman Sachs raised their price target on the stock from $139.00 to $148.00. Currently, Goldman Sachs has a neutral rating on the stock.

Huntington Ingalls is the prime industrial employer in Virginia. Originally an affiliate of Northrop Grumman Corp. NOC, the company was spun off in Mar 2011. It is the sole designer and manufacturer of nuclear powered aircraft carriers in the U.S. Over 70% of the active U.S. Navy fleet consists of Huntington Ingalls ships.

Given the positive shipbuilding business outlook in the enacted fiscal 2016 and proposed fiscal 2017 budget, the company seems to be well poised for further gains. Recently, the U.S. Navy unveiled its five-year budget proposal that allocates $81.4 billion for the purchase of 38 warships, submarines and support vessels during the 2017–2021 time frame.

This is also reassuring for prime defense contractors like General Dynamics Corp. GD, Huntington Ingalls and Lockheed Martin Corp. LMT (read more: Good News for GD, HII, LMT: $81.4B Budget Proposal for Ships).

Huntington Ingalls maintains stable liquidity and capital resources to fund its operations. The company’s net cash from operating activities in 2015 increased 15.6% to $828 million from the 2014 level. Free cash flow was $640 million in 2015, up 16.2% year over year. On the other hand, Huntington Ingalls’ long-term debt dropped 18.5% to $1,273 million as of Dec 31, 2015, from end 2014.

A stable financial position backed by a strong cash generation capacity enables Huntington Ingalls to follow a disciplined capital spending program. The company remains committed to returning 100% of free cash flow to its shareholders in its current five-year plan.

The company has an expected earnings growth rate of 10.8% with the forward price-to-earnings (P/E) multiple of 14.62 at a 14% discount to the S&P 500 peer group average.

Zacks Rank

Currently, Huntington Ingalls has a Zacks Rank #2 (Buy).

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NORTHROP GRUMMN (NOC): Free Stock Analysis Report
GENL DYNAMICS (GD): Free Stock Analysis Report
LOCKHEED MARTIN (LMT): Free Stock Analysis Report
HUNTINGTON INGL (HII): Free Stock Analysis Report
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