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Huntington Ingalls

Huntington Ingalls: Too Much Optimism For This Company

Huntington Ingalls Industries (HII) is a stock that I want to like. Actually, I wrote a bullish article on it a few months ago entitled “Huntington Ingalls: A Record Backlog And Undervaluation Means Buy.” The stock price surged after that article but now trades lower after relatively poor Q2 2020 results. Additionally, most of the SA authors covering the stock are bullish. In fact, only two authors have written neutral articles (one by me when the stock was overvalued), and none have written bearish articles since 2011. On a positive note, Huntington Ingalls is in the defense industry and has little competition in surface ship construction for the U.S. Navy. The backlog is healthy at about $46.1 billion. In addition, the dividend is very safe and will likely remain so in the future. Huntington Ingalls is a Dividend Challenger. But the company is not performing as well as other defense contractors on several metrics. Investors have too much optimism for Huntington Ingalls. I think most investors seeking to add a dividend stock to their portfolio in the defense sector should look elsewhere. I outline why I am largely neutral on the stock now.

Overview of Huntington Ingalls – Too Much Optimism

Huntington Ingalls Industries builds nuclear and non-nuclear ships for the U.S. Navy. The company reports in three business segments: Newport News Shipbuilding (58% of revenue), Ingalls Shipbuilding (29% of revenue) and Technical Solutions (13% of revenue). Newport News builds nuclear powered aircraft carriers and submarines. Ingalls builds surface combatant ships, amphibious assault ships and Coast Guard cutters. Technical Solutions provides fleet maintenance and modernization, IT support, nuclear management and operations, and oil and gas engineering. Huntington Ingalls is the largest supplier of U.S. Navy surface combatant ships. The company has built more than 70% of the Navy’s fleet of warships. In addition, Huntington Ingalls is the sole builder of aircraft carriers, exclusive provider of refueling services for nuclear aircraft carriers, one of two builders of nuclear submarines, builder of record of the DDG 51 class Aegis guided missile destroyers…

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Prakash Kolli is the founder of the Dividend Power site. He is a self-taught investor, analyst, and writer on dividend growth stocks and financial independence. His writings can be found on Seeking Alpha, InvestorPlace, Business Insider, Nasdaq, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, and leading financial sites. In addition, he is part of the Portfolio Insight and Sure Dividend teams. He was recently in the top 1.0% and 100 (73 out of over 13,450) financial bloggers, as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.

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