Core Points - HII has appointed Kari Wilkinson as the new president of Newport News Shipbuilding, effective January 1, 2025, succeeding Jennifer Boykin who is retiring after 37 years with the company [1][3] - Newport News Shipbuilding is HII's largest division, employing over 26,000 shipbuilders and focusing on the design, construction, and maintenance of nuclear-powered aircraft carriers and submarines [2][3] - Jennifer Boykin's tenure is noted for significant achievements, including leadership during the COVID-19 pandemic, digital transformation in shipbuilding, and securing major contracts for the U.S. Navy [8] Company Leadership Changes - Kari Wilkinson, previously president of HII's Ingalls Shipbuilding division, has a strong track record, including securing a $9.6 billion contract for three San Antonio-class amphibious ships [5][6] - Brian Blanchette has been elected as the new executive vice president of HII and president of Ingalls Shipbuilding, bringing 28 years of experience within the company [6][7] Company Overview - HII is the largest military shipbuilder in the U.S., with a history of over 135 years in advancing national security [10] - The company employs approximately 44,000 people and provides a range of defense capabilities, including ships, unmanned systems, and cyber solutions [10]

Core Insights - Huntington Ingalls Industries reported disappointing third-quarter earnings, missing analyst estimates by 34.2% on EPS and cutting its full-year guidance [2] - The company's gross and operating margins declined compared to the same quarter in the previous year [2] - Following the earnings report, Huntington Ingalls' stock price dropped over 26%, closing at $184.96 per share on October 31, 2024, down from $250.49 per share the previous day [2] Investigation - Kessler Topaz Meltzer & Check, LLP is investigating potential violations of federal securities laws on behalf of investors of Huntington Ingalls Industries [1] - The law firm has a history of prosecuting class actions involving securities fraud and breaches of fiduciary duties [3]

Core Insights - Huntington Ingalls Industries reported Q3 earnings that significantly missed analyst expectations, with a 34.2% shortfall in EPS [2] - The company's gross and operating margins declined compared to the same quarter last year [2] - Following the earnings report, Huntington Ingalls' stock price plummeted over 26% on the announcement day [2] Investigation Details - Bronstein, Gewirtz & Grossman, LLC is investigating potential claims on behalf of investors who purchased Huntington Ingalls securities [1] - Investors are encouraged to provide information related to the investigation [3] Legal Representation - The firm operates on a contingency fee basis, meaning they will only seek reimbursement for expenses and fees if successful [4] - Bronstein, Gewirtz & Grossman, LLC has a history of recovering substantial amounts for investors in securities fraud cases [5]

Core Insights - HII hosted a delegation from the United Kingdom's defense sector at its Newport News Shipbuilding division, emphasizing the importance of collaboration in defense capabilities [1][2] - The visit follows the renewal of the 1958 Mutual Defense Agreement, highlighting the commitment to strengthen bilateral relations and enhance national security [2][3] - HII is recognized as the largest military shipbuilder in the U.S., specializing in nuclear-powered vessels, and plays a crucial role in national security [4][5] Company Overview - HII is a global defense provider focused on delivering advanced ships and all-domain solutions to protect peace and freedom [4] - The company has a workforce of 44,000 and a history of over 135 years in advancing U.S. national security [5] - HII is the sole designer, builder, and refueler of nuclear-powered aircraft carriers in the U.S. and one of only two shipyards capable of designing and building nuclear-powered submarines [3]

Core Viewpoint - Huntington Ingalls Industries is facing significant cost issues that are expected to take time to resolve, leading to disappointing quarterly results and a reduction in full-year guidance, which has negatively impacted its stock price [1][2]. Financial Performance - The company reported earnings of $2.56 per share on sales of $2.7 billion, falling short of the consensus estimates of $3.86 per share on sales of $2.87 billion [3]. - Huntington Ingalls has lowered its full-year 2024 shipbuilding revenue guidance to $8.8 billion, down from a previous range of $8.8 billion to $9.1 billion [4]. Operational Challenges - The company is experiencing lower volumes on key shipbuilding programs and has made unfavorable adjustments to total costs for future ships, indicating ongoing execution issues, particularly at the Newport News shipyard [3][5]. - CEO Chris Kastner highlighted that the contracts for ships currently under construction were negotiated before the COVID-19 pandemic, which did not account for the significant disruptions in workforce and supply chain, as well as heightened cost inflation [3]. Market Outlook - Despite the challenges, there is potential for future business as the Navy will require new ships, positioning Huntington Ingalls and General Dynamics to benefit from this demand [5]. - However, investors are advised to wait until the company stabilizes before considering investment, as labor productivity issues are expected to persist [5][6].

Group 1 - Huntington Ingalls Industries (NYSE: HII) reported third quarter earnings on October 31, leading to a stock price decline of over 25% [1] - The stock had previously been rated as a hold, indicating a cautious outlook prior to the earnings report [1] - The Aerospace Forum focuses on identifying investment opportunities within the aerospace, defense, and airline sectors, leveraging data analytics for informed analysis [1] Group 2 - The article emphasizes the importance of data-driven analysis in understanding complex industries with significant growth potential [1] - The investing group provides direct access to data analytics monitors, enhancing the investment research process [1]

Market Overview - The S&P 500 dropped 1.9% on October 31, with significant declines in the tech sector due to major firms' spending on AI infrastructure [2][1] - The Dow fell 0.9%, while the Nasdaq experienced the largest decline, plunging 2.8% [2] Company Performance - Huntington Ingalls Industries (HII) shares fell 26.2% after missing quarterly profit estimates and reducing its full-year sales forecast, citing uncertainty with U.S. Navy agreements and labor supply chain issues [3] - Estée Lauder (EL) shares dropped 20.9% after withdrawing its full-year outlook and cutting its dividend, reporting declines in quarterly revenue and organic sales due to weakness in China and Asia travel markets [4] - Aptiv (APTV) shares decreased by 17.7% following production challenges and reduced customer scheduling, although the company is implementing cost-cutting measures [5] - Paycom Software (PAYC) shares surged 21.3% after reporting better-than-expected sales and profits, driven by a strong labor market [6] - Entergy (ETR) shares increased by 15.2% after beating profit estimates and raising its full-year outlook, despite a year-over-year revenue decline [7] - International Paper (IP) shares rose 13.3% after topping profit estimates and announcing a review of strategic options for its global cellulose fibers business [8]

Core Viewpoint - Huntington Ingalls Industries, Inc. (HII) reported a significant decline in earnings and revenues for the third quarter of 2024, primarily due to poor sales performance across its business segments, particularly in shipbuilding [1][2]. Financial Performance - Earnings per share for Q3 2024 were $2.56, down 30.8% from $3.70 in the same quarter last year, and missed the Zacks Consensus Estimate of $3.84 by 33.3% [1]. - Total revenues for the quarter were $2.75 billion, missing the Zacks Consensus Estimate of $2.88 billion by 4.5%, and declined 2.4% from $2.82 billion in the prior year [2]. Operational Performance - Segment operating income was reported at $97 million, down from $187 million in Q3 2023, with an operating margin of 3.5%, which expanded by 310 basis points year-over-year [3]. - The decline in operating income was largely attributed to poor performance at the Newport News Shipbuilding unit, which faced a net unfavorable cumulative adjustment of $78 million [3]. Segmental Performance - **Newport News Shipbuilding**: Revenues were $1.41 billion, down 2.8% year-over-year, with operating earnings of $15 million, a decrease of 83.3% due to lower volumes and unfavorable adjustments [5][6]. - **Ingalls Shipbuilding**: Revenues totaled $664 million, down 6.6% year-over-year, with operating income of $49 million, a drop of 32.9% due to lower performance in amphibious assault ships [7]. - **Mission Technologies**: Revenues increased to $709 million, up 3.5% year-over-year, with operating income rising 37.5% to $33 million, driven by higher volumes in cyber and electronic warfare programs [8]. Order and Backlog - HII received orders worth $3.6 billion in the reported quarter, increasing its total backlog to $49.4 billion as of September 30, 2024, compared to $48.5 billion as of June 30, 2024 [4]. Financial Update - Cash and cash equivalents as of September 30, 2024, were $10 million, significantly down from $430 million at the end of 2023 [9]. - Long-term debt decreased to $1.71 billion from $2.21 billion at the end of 2023 [9]. - Cash flow from operating activities was $2 million, down from $408 million a year ago [9]. - The company generated a free cash outflow of $273 million in the first nine months of 2024, compared to a free cash inflow of $258 million in the prior-year period [10]. Guidance - HII updated its 2024 guidance, expecting shipbuilding revenues to be approximately $8.8 billion, with Mission Technologies revenues projected between $2.80 billion and $2.85 billion [11]. - The company now anticipates free cash flow to be in the range of $0-$100 million for 2024, a significant reduction from the previous projection of $600-$700 million [11].

PART I – FINANCIAL INFORMATION [Item 1. Financial Statements](index=2&type=section&id=Item%201.%20Financial%20Statements) Financial statements reveal a Q3 earnings decline, sharply reduced cash balances, and a severe drop in year-to-date operating cash flow Condensed Consolidated Statements of Operations and Comprehensive Income Q3 & Nine Months 2024 vs 2023 Operating Results (in millions, except per share amounts) | Metric | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | :--- | :--- | | Sales and service revenues | $2,749 | $2,816 | $8,531 | $8,277 | | Operating income | $82 | $172 | $425 | $469 | | Net earnings | $101 | $148 | $427 | $407 | | Diluted earnings per share | $2.56 | $3.70 | $10.81 | $10.18 | - For the third quarter of 2024, sales and service revenues decreased by **2.4% YoY**, and operating income fell sharply by **52.3% YoY**[5](index=5&type=chunk) - For the nine months ended September 30, 2024, sales and service revenues increased by **3.1% YoY**, while net earnings grew by **4.9% YoY**[5](index=5&type=chunk) Condensed Consolidated Statements of Financial Position Financial Position as of Sept 30, 2024 vs Dec 31, 2023 (in millions) | Account | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $10 | $430 | | Total current assets | $2,629 | $2,880 | | Total assets | $11,082 | $11,215 | | **Liabilities & Equity** | | | | Total current liabilities | $3,336 | $3,032 | | Long-term debt | $1,709 | $2,214 | | Total liabilities | $6,879 | $7,122 | | Total stockholders' equity | $4,203 | $4,093 | - Cash and cash equivalents decreased significantly to **$10 million** as of September 30, 2024, from **$430 million** at the end of 2023[6](index=6&type=chunk) Condensed Consolidated Statements of Cash Flows Cash Flow Summary for Nine Months Ended Sept 30 (in millions) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2 | $408 | | Net cash used in investing activities | ($238) | ($111) | | Net cash used in financing activities | ($184) | ($655) | | **Change in cash and cash equivalents** | **($420)** | **($358)** | - Net cash from operating activities plummeted to **$2 million** for the first nine months of 2024, a sharp decline from **$408 million** in the same period of 2023[9](index=9&type=chunk) - Financing activities included **$162 million** in common stock repurchases and **$154 million** in dividend payments during the first nine months of 2024[9](index=9&type=chunk) Notes to Condensed Consolidated Financial Statements - The company operates in three reportable segments: Ingalls Shipbuilding, Newport News Shipbuilding, and Mission Technologies, serving as America's largest shipbuilder[12](index=12&type=chunk) - In September 2024, the company amended its credit facility, increasing capacity from **$1.5 billion to $1.7 billion** and extending the maturity[20](index=20&type=chunk)[23](index=23&type=chunk) - The board of directors increased the stock repurchase program authorization to **$3.8 billion** and extended it to December 31, 2028[27](index=27&type=chunk) - As of September 30, 2024, the company had **$49.4 billion** of remaining performance obligations, with approximately **30%** expected to be recognized as revenue through 2025[41](index=41&type=chunk) - During the third quarter, the company identified quality issues involving noncompliance with welding procedures at Newport News and has commenced an investigation, disclosing the matter to the U.S. Government[61](index=61&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Q3 operating income fell 52% due to shipbuilding performance issues, while free cash flow turned negative amid working capital pressures Consolidated Operating Results Consolidated Operating Results Summary (in millions) | Metric | Q3 2024 | Q3 2023 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Sales and service revenues | $2,749 | $2,816 | $(67) | (2)% | | Operating income | $82 | $172 | $(90) | (52)% | | Net earnings | $101 | $148 | $(47) | (32)% | - Q3 2024 sales decreased **2% YoY**, primarily due to lower volumes at Ingalls and Newport News, partially offset by growth at Mission Technologies[97](index=97&type=chunk) - The significant **52% drop** in Q3 operating income was primarily due to unfavorable performance and cumulative catch-up adjustments in the shipbuilding segments[93](index=93&type=chunk)[107](index=107&type=chunk) Segment Operating Results Segment Operating Income (in millions) | Segment | Q3 2024 | Q3 2023 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Ingalls | $49 | $73 | $(24) | (33)% | | Newport News | $15 | $90 | $(75) | (83)% | | Mission Technologies | $33 | $24 | $9 | 38% | | **Total Segment Operating Income** | **$97** | **$187** | **$(90)** | **(48)%** | - Newport News' operating income plummeted **83%** in Q3 2024, driven by lower performance on the Virginia class submarine program and aircraft carriers[127](index=127&type=chunk) - Ingalls' operating income decreased **33%** in Q3 2024 due to lower performance on amphibious assault ships and surface combatants[122](index=122&type=chunk) - Mission Technologies' operating income grew **38%** in Q3 2024, driven by higher volumes in CEW&S and higher equity income from joint ventures[131](index=131&type=chunk) Backlog - Total backlog increased to **$49.4 billion** as of September 30, 2024, up from **$48.1 billion** at the end of 2023[151](index=151&type=chunk) Backlog by Segment (in billions) | Segment | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Ingalls | $16.4 | $15.7 | | Newport News | $27.3 | $27.2 | | Mission Technologies | $5.8 | $5.1 | | **Total** | **$49.4** | **$48.1** | - New contract awards during the first nine months of 2024 totaled **$9.8 billion**[153](index=153&type=chunk) Liquidity and Capital Resources Cash Flow and Free Cash Flow for Nine Months Ended Sept 30 (in millions) | Metric | 2024 | 2023 | Change ($) | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $2 | $408 | $(406) | | Capital expenditures, net | ($239) | ($150) | $(89) | | **Free cash flow** | **($237)** | **$258** | **$(495)** | - Operating cash flow for the first nine months of 2024 was severely impacted, falling to **$2 million** from **$408 million** in the prior-year period, primarily due to unfavorable changes in trade working capital[157](index=157&type=chunk) - Free cash flow was **negative $237 million** for the first nine months of 2024, a **$495 million decrease** from the same period in 2023, reflecting the drop in operating cash and higher capital expenditures[162](index=162&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company faces market risks from interest rates on its floating-rate debt and from inflation impacting material and labor costs - The company has interest rate risk on its floating rate debt, including **$396 million** outstanding under its commercial paper program as of September 30, 2024[174](index=174&type=chunk) - Persistent cost inflation for raw materials, components, and labor may adversely impact financial position and results if not fully mitigated through long-term agreements and price escalation clauses[175](index=175&type=chunk) [Item 4. Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - The CEO and CFO concluded that as of September 30, 2024, the company's disclosure controls and procedures were effective[176](index=176&type=chunk) - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[177](index=177&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in ordinary course legal proceedings, which are not expected to have a material adverse financial impact - Information on legal proceedings is provided in Note 9 of the financial statements and is incorporated by reference[179](index=179&type=chunk) [Item 1A. Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) This report references the risk factors disclosed in the 2023 Annual Report, with no material changes noted for the quarter - The report directs investors to consider the risk factors discussed in the 2023 Annual Report on Form 10-K[181](index=181&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased $35.4 million of its common stock in Q3 2024, with $1.35 billion remaining under its extended repurchase program Share Repurchases for Q3 2024 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July 2024 | 46,258 | $266.08 | | August 2024 | 88,145 | $261.37 | | September 2024 | 0 | — | | **Total** | **134,403** | **$262.99** | - As of September 30, 2024, approximately **$1.35 billion** remained available for purchase under the company's stock repurchase program[183](index=183&type=chunk)

Huntington Ingalls (HII) reported $2.75 billion in revenue for the quarter ended September 2024, representing a year-over-year decline of 2.4%. EPS of $2.56 for the same period compares to $3.70 a year ago.The reported revenue compares to the Zacks Consensus Estimate of $2.88 billion, representing a surprise of -4.51%. The company delivered an EPS surprise of -33.33%, with the consensus EPS estimate being $3.84.While investors closely watch year-over-year changes in headline numbers -- revenue and earnings ...