Is Huntington Ingalls Stock Underperforming the Dow?

Newport News, Virginia-based Huntington Ingalls Industries, Inc. (HII) designs, builds, overhauls, and repairs military ships in the United States. Valued at a market cap of $10.5 billion, the company operates through three segments: Ingalls, Newport News, and Mission Technologies, and designs and constructs non-nuclear ships, including amphibious assault ships, surface combatants, and national security cutters, for the U.S. Navy and U.S. Coast Guard. 

Companies with a market cap of $10 billion or more are typically referred to as “ large-cap stocks.” HII fits perfectly into that category, with its market cap exceeding this threshold and reflecting its substantial size and influence in the aerospace and defense industry.      

Despite its strength, shares of  Huntington Ingalls are down 42.2% from its 52-week high of $460, touched on Mar. 2. Moreover, HII has fallen 4.9% over the past three months and has lagged behind the Dow Jones Industrial Average ($DOWI), which has declined 2.8% during the same period.    

Zooming out a little further, the scenario remains the same. Over the past 52 weeks, HII has declined 4.2%, lagging behind DOWI’s 23.5% gain.              

HII has been trading below its 200-day moving average since May and also below its 50-day moving average since August.

Despite being favorably positioned in the geopolitical landscape with its several defense offerings, HII has not been the primary defense stock choice for investors due to problems with its fundamentals. The company’s annual sales growth over the past two years came in at 5.8%, lagging behind its peers in the industrials sector, primarily due to issues generating incremental demand given its larger revenue base. Moreover, the company’s EPS fell 1.9% annually over the past five years, indicating less-than-profitable incremental sales. Additionally, HII’s free cash flow margin dropped by 5.7% over the past five years, too, hinting at a more capital-intensive company with higher competition. 

When stacked against its peer, Northrop Grumman Corporation (NOC), HII has outperformed. Over the past year, NOC stock has declined 13.2%.      

Sentiment on HII remains moderately optimistic. Among the 13 analysts covering the stock, the consensus rating is a “Moderate Buy.” Its mean price target of $353.69 suggests 33% upside from current levels.  

On the date of publication, Aritra Gangopadhyay did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.