Huntington Ingalls Swings to Third-Quarter Profit on Absence of Impairment Charge

Date : 11/08/2012 @ 8:15AM
Source : Dow Jones News
Stock : Huntington Ingalls Industries, Inc. (HII)
Quote : 244.43  3.7 (1.54%) @ 4:01PM

Huntington Ingalls Swings to Third-Quarter Profit on Absence of Impairment Charge

Huntington Ingalls Industries, Inc. (NYSE:HII)
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   By Saabira Chaudhuri 

Huntington Ingalls Industries Inc. (HII) swung to a modest third-quarter profit as the military shipbuilder benefited from a comparison with a year-ago period bogged down by a large goodwill impairment charge.

However, core earnings declined and results missed Wall Street estimates.

Huntington Ingalls was spun out of Northrop Grumman Corp. (NOC) last year and is viewed as more resilient to budget cuts than its peers because the Pentagon prioritized many naval projects as part of efforts to boost the U.S. military presence in the Pacific.

The largest military shipbuilder in the U.S. had recently seen strong revenue growth amid higher sales of amphibious assault ships, aircraft carriers and submarines. However, in the latest period, it noted that sales of the assault ships fell, primarily due to the deliveries of LPD-22 USS San Diego in 2011 and LPD-23 Anchorage in 2012.

The company also said Thursday its board has approved its first quarterly cash dividend, of 10 cents a share. It also said the board has authorized a $150 million share buyback program, to be deployed over the next three years.

"Distributing cash to shareholders is a key component of our disciplined capital allocation strategy, which also includes investment in organic and other growth opportunities, pension funding and debt service," Chief Executive Mike Petters said.

Huntington Ingalls reported a profit of $13 million, or 26 cents a share, versus a year-ago loss of $248 million, or $5.07 a share. The most recent period included a $24 million non-cash worker's compensation charge, while the year-ago period included a $300 million goodwill impairment charge. Excluding one-time items, earnings were 74 cents versus $1.05 a year ago.

Revenue was virtually flat at $1.6 billion. Analysts polled by Thomson Reuters had most recently forecast earnings of 80 cents on revenue of $1.64 billion.

Still, Mr. Petters noted that core operating performance at the company continues to improve and it remains on pace to deliver operating margins over 9% by 2015.

"Although the underperforming ships at Ingalls continue to prove challenging, we delivered LPD-23 Anchorage during the third quarter, and we expect to deliver LPD-24 Arlington by the end of this year," he said. "Our backlog remains healthy at $16.4 billion and we are working diligently with our Navy and Coast Guard customers to provide affordable and high-quality warships."

Operating margin swung to positive 4.1% from negative 11.9%.

Shares closed Wednesday at $43.46 and were inactive in recent premarket trading. The stock has risen 44% in the past 12 months.

Write to Saabira Chaudhuri at

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