Shares of Huntington Ingalls Industries, Inc. HII touched a new 52-week high of $181.68 on Nov 29, before closing a little lower at $180.55. The largest U.S. military shipbuilder’s stock has surged about 35% in the last one year, outperforming the Zacks Categorized Aerospace/Defense industry’s gain of 8.9% over the same time frame.
Huntington Ingalls has a market cap of $8.37 billion. Over the past 52 weeks, the company’s shares have ranged from a low of $118.20 to a high of $181.68. Average volume of shares traded over the last three months is approximately 0.3 million.
What’s Driving Huntington Ingalls?
Huntington Ingalls is the sole designer and manufacturer of nuclear-powered aircraft carriers in the U.S. The company is also the prime industrial employer in Virginia. More than 70% of the active U.S. Navy fleet consists of Huntington Ingalls ships.
Notably, the company’s management maintains stable liquidity and capital resources to fund operations. Net cash from operating activities in the first nine months of 2016 increased 11.4% to $477 million from $428 million a year ago.
In addition, the company focuses on maximizing shareholder value through both share repurchases and incremental dividend payouts. During the first nine months of 2016, the company paid $70 million as dividends, up from $58 million a year ago. Moreover, it has repurchased common stock worth $152 million during the first nine months of 2016.
Moreover, the shipbuilding business prospects continue to be bright on the implementation of the fiscal 2016 budget and the fiscal 2017 proposal. Notably, an impressive number of Huntington Ingalls’ shipbuilding programs have been funded by the 2016 budget. Moreover, the proposed fiscal 2017 budget allocates $582.7 billion to the U.S. Department of Defense, comprising $71.4 billion for research & development and $8.1 billion for submarines. This indicates that the company is well positioned for long-term growth. Besides, multi-year stability in shipbuilding would likely lead to robust cash flows.
In addition to these positives, the victory of Donald Trump in the Presidential race bodes well for Aerospace and Defense sector companies like Huntington Ingalls, Lockheed Martin Corp. LMT, Boeing Co. BA and Northrop Grumman Corp. NOC as it has lifted expectations of increased military spending. A moderate flow of funds from the Pentagon added to the optimism.
Huntington Ingalls currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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