Pick Huntington Ingalls Stock For 20% Gain

HII: Huntington Ingalls Industries logo
HII
Huntington Ingalls Industries

After dropping to the lows of $153 in March 2020, the shares of Huntington Ingalls (NYSE: HII) have recovered a substantial portion of their lost value. Given a stable financial performance during the pandemic and strong order backlog of $48 billion, Trefis believes that the stock has more room for growth. Huntington Ingalls is the largest military ship building company in the U.S. With the Department of Defense as a prime customer, the company is engaged in many high-priority defense programs. Notably, the government and commercial customers contributed 97% and 3% of total revenues, respectively. Our interactive dashboard analysis highlights Huntington Ingalls’ stock performance during the current crisis with that during the 2008. recession.

Timeline of 2020 Crisis So Far:

  • 12/12/2019: Coronavirus cases first reported in China
  • 1/31/2020: WHO declares a global health emergency.
  • 2/19/2020: Signs of effective containment in China and hopes of monetary easing by major central banks helps S&P 500 reach a record high
  • 3/23/2020: S&P 500 drops 34% from the peak level seen on Feb 19, as Covid-19 cases accelerate outside China. Doesn’t help that oil prices crash in mid-March amid Saudi-led price war
  • From 3/24/2020: S&P 500 recovers 90% from the lows seen on Mar 23, as the Fed’s multi-billion dollar stimulus package suppresses near-term survival anxiety and infuses liquidity into the system.

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In contrast, here’s how HII and the broader market performed during the 2007/2008 crisis.

Timeline of 2007-08 Crisis

  • 10/1/2007: Approximate pre-crisis peak in S&P 500 index
  • 9/1/2008 – 10/1/2008: Accelerated market decline corresponding to Lehman bankruptcy filing (9/15/08)
  • 3/1/2009: Approximate bottoming out of S&P 500 index
  • 1/1/2010: Initial recovery to levels before accelerated decline (around 9/1/2008)

Huntington Ingalls Industries Stock vs S&P 500 Performance Over 2007-08 Financial Crisis

HII stock remained fairly level at $37 in September 2007 (pre-crisis peak) to the level of around $39 in March 2009 (as the markets bottomed out). In comparison, the S&P 500 Index first fell 51% in the wake of the recession before recovering 48% by January 2010.

Huntington Ingalls Industries’ Fundamentals Look Strong

Huntington Ingalls’ revenues observed a 15% growth from $8.2 billion in 2018 to $9.4 billion in 2020. The net income margin declined slightly from 7.4% in 2018 to 10.2% in 2020 due to higher product costs. However, the company increased its dividend per share by 40% from $3.02/share in 2018 to $4.23/share in 2020. Notably, the company reported a strong order backlog of $48 billion per recent filings.

CONCLUSION

Phases of Covid-19 crisis:

  • Early- to mid-March 2020: Fear of the coronavirus outbreak spreading rapidly translates into reality, with the number of cases accelerating globally
  • Late-March 2020 onward: Social distancing measures + lockdowns
  • April 2020: Fed stimulus suppresses near-term survival anxiety
  • May-June 2020: Recovery of demand, with gradual lifting of lockdowns – no panic anymore despite a steady increase in the number of cases
  • Since late 2020: Weak quarterly results, but continued improvement in demand and progress with vaccine development buoy market sentiment

Given the company’s stable financial performance, a huge order backlog, and consistent shareholder returns, Trefis believes that the stock has more room for growth.

Do Huntington’s peers offer better gains? Huntington Ingalls Stock Comparison With Peers summarizes how HII compares against peers on metrics that matter. You can find more such useful comparisons on Peer Comparisons.

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