Huntington Ingalls Industries Inc. Sails Out of 2013 With a Profit

But beware: The U.S. Coast Guard has set up some shoals that this shipbuilder must now navigate.

Feb 27, 2014 at 12:31PM

Huntington Ingalls (NYSE:HII) shares are soaring this morning, buoyed by a positive report on how Q4 earnings surged at the tail end of 2013. Expected to report a $1.19 per share profit on revenues of $1.75 billion, Huntington instead treated investors to a report of $1.82 per share (diluted) earned, and $1.94 billion in revenue, easily exceeding expectations on both fronts.

And that was just the beginning -- or rather the end -- of the good news. As it turns out, pretty much all of 2013 was pretty kind to Huntington. Here's a quick rundown of the highlights for 2013:

  • Revenues grew less than 2% to $6.82 billion.
  • Operating profit margins rose 220 basis points to 7.5%.
  • Net profits were up 79% at $261 million.
  • And profits per diluted share did nearly as well -- up 78% to $5.18 per diluted share.

Huntington's business is divided into two main divisions: Ingalls Shipbuilding, which builds smallish warships such as amphibious assault ships, guided missile destroyers, and Coast Guard cutters; and Newport News Shipbuilding, where the company churns out hulking, nuclear-powered vessels such as America's aircraft carriers and ballistic missile submarines.

Of the two, Newport News is by far the more profitable operation, generating operating profit margins of 9.1% last year. Doing so well, the division also had the least room for improvement in 2013, however, and grew its operating profit margin to "only" 9.5%.

In contrast, Ingalls Shipbuilding was a real laggard in 2012, achieving only 3.4% operating profitability. In 2013, it grew that number by leaps and bounds, nearly doubling profitability to a (relatively) sterling 6.3% operating profit margin. Going forward, I'd expect the division to maintain that momentum as it continues churning out Legend-class National Security Cutters, Arleigh Burke-class DDGs, and the new line of America-class mini-aircraft carriers.

One Foolish caveat
The one thing that could derail Ingalls Shipbuilding's resurgence, though, is the fact that earlier this month, the U.S. Coast Guard cut Huntington out of the contest to build its new line of Offshore Patrol Cutters -- a potential $12 billion bonanza for the company, which will now more likely go to Huntington rival General Dynamics (NYSE:GD). Huntington announced this week that it will protest the Coast Guard's decision; if it's successful, winning that contract could give the company a real shot in the arm, and a chance at boosting profit margins even further.

The risk? Huntington was expected to be awarded this contract from the get-go. If it fails to win the Coast Guard over to its cause, analyst expectations for growth rates could come down by a lot -- and the stock's value to investors will surely sink.

Beware the shoals
A second strike against Huntington Ingalls is the fact that, within the defense contracting industry, it pays one of the stingiest dividend yields around -- less than 1%!

Historically, dividend-paying stocks handily outperform their non-dividend paying brethren, and the bigger the dividend, obviously, the better. The reasons for this are too numerous to list here, but you can rest assured that it's true. However, knowing this is only half the battle. The other half is identifying which dividend stocks in particular are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor's portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.

Rich Smith has no position in any stocks mentioned. The Motley Fool owns shares of General Dynamics. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers