Huntington Ingalls Industries [HII] on Thursday posted strong top and bottom-line results in its second quarter driven primarily by its shipbuilding operations despite pension headwinds.
Net income was up 146 percent to $129 million, $3.20 earnings per share (EPS), from $53 million ($1.30 EPS) a year ago. Excluding pension impacts, adjusted earnings of $3.05 EPS topped consensus estimates by 49 cents per share.
Sales increased 10 percent to $2.2 billion from $2 billion a year ago.
At the operating level, all three of HII’s segments contributed to the increase in the bottom line, led by Newport News Shipbuilding, which swung to a profit in the quarter after incurring charges a year ago on the Virginia-class submarine program and impacts from the COVID-19 pandemic.
The Ingalls Shipbuilding segment posted a strong double-digit operating profit increase due to an incentive benefit on a destroyer program and higher risk retirement on several amphibious assault ship programs. Technical Solutions, the smallest segment, also boasted strong operating income due to a ship repair joint venture and improved performance at its government services businesses.
Newport News drove the top-line growth due to higher volumes on the Virginia-class Block IV and V, the Columbia-class submarine, and aircraft carrier construction and refueling and complex overhaul work.
Ingalls also contributed to the sales increase due to work on destroyers and amphibious assault ships while Technical Solutions was down on a divestiture, shipyard work and lower unmanned systems volume. Unmanned systems sales were down due to delays in awards for new programs, Chris Kastner, HII’s chief operating officer, said on the company’s earnings call.
The only guidance update that HII offered is for its shipbuilding margin, which is expected to be between 7.5 and 8 percent this year, up 50 basis points on the low end of the range given in the prior outlook due to strong performance so far in 2021. Shipbuilding margin in the first half of 2021 is 8.3 percent.
Orders in the quarter totaled $1.2 billion and backlog at the end of June stood at $47.7 billion, up nearly 4 percent from $46 billion at the end of 2020. Free cash flow in the quarter was $23 million.
HII said its pending $1.7 billion acquisition of Alion Science and Technology will close in the coming weeks. HII expects to incur a one-time $25 million pre-tax expenses related to the deal this year, Tom Stiehle, the company’s chief financial officer, said on the earnings call.
The acquisition of Alion, announced in July, will more than double the size of HII’s Technical Solutions segment and help it meet evolving Navy requirements.