A new report by consulting firm McAleese & Associates says investors expect Huntington Ingalls Industries (NYSE: HII) to return to 10 percent shipbuilding operating margins in 2019.
Jim McAleese, founder and principal at McAleese & Associates and a 2019 Wash100 winner, wrote in the report the figure could be driven by five ship deliveries this year and œEAC-risk-retirement profit increase expected from the launch of the CVN-79 Kennedy aircraft carrier in the fourth quarter of 2019.
HII saw its 2018 sales grow 10 percent to $8.2B, according to the report.
Meanwhile, CEO Mike Petters said Thursday at the company™s earnings call that he expects HII to reach 9 percent to 10 percent shipbuilding margins by 2020.
HII also anticipates the inclusion of the potential 2020-2024 LPD Flight II multi-year program in the U.S. Navy™s upcoming budget request for fiscal 2020 and now pushes for a two-ship buy of LHA-9 and LHA-10 America-class amphibious assault ships.
HII still invests 5 percent of its sales in capital expenditures, while investors call for cuts to CapEx by 2021 to protect the company™s cash flow, according to the report.
McAleese noted that the Ingalls Shipbuilding business accounted for 32 percent of the parent company™s total sales and 47 percent of the total sector profits, making it HII™s œprofit engine.
HII™s œgrowth engine is Newport News Shipbuilding, which generated 58 percent of total sales and 49 percent of total sector profits, the report noted.
According to HII™s Q4 and full-year 2018 financial results, HII™s technical solutions business saw its 2018 revenue increase 3.8 percent to $988M and posted $32M in operating income, up from $21M in 2017.
In December, HII acquired Annapolis Junction, Md.-based cybersecurity services provider G2, which is now part of the technical solutions segment.
