Huntington Ingalls Industries [HII] on Thursday reported slight declines in sales and earnings in its fourth quarter on lower revenue from its work on Coast Guard cutters and the Navy’s amphibious assault ships while its energy business continued to suffer from turmoil in oil and gas markets.
Net income fell 4 percent to $50 million, $1.06 earnings per share (EPS), from $52 million ($1.05 EPS) a year ago as overall operating income was down in its shipbuilding segments and losses widened in its energy services business. Adjusting for non-cash impairment charges in the oil and gas services business, earnings from continuing operations of $1.95 EPS were 35 cents below consensus estimates.
Sales and operating profits were up at the Newport News Shipbuilding segment on higher revenue in the Virginia-class submarine program and for aircraft carrier fleet support services. Sales and income in the segment were up 3 percent to $1.3 billion and $120 million, respectively.
At the Ingalls Shipbuilding segment, sales dipped 5 percent to $580 million on less work on the Coast Guard’s National Security Cutter program and the Navy assault ships. Operating income fell 18 percent to $59 million on lower risk retirement on the Navy’s LPD amphibious transport dock program.
Overall shipbuilding margins were 9.5 percent in the quarter.
Sales in the energy services segment fell by nearly half to $29 million and operating losses widened by a million dollars to $55 million.
HII provided an outlook for 2016 that projects flat sales and shipbuilding margins above 9 percent. In 2015, sales increased a percent to $7.9 billion while net income jumped 20 percent to $404 million ($8.36 EPS).
Free cash flow was $309 million for the quarter and $640 million for the year.
Mike Petters, HII’s president and CEO, said on an earnings call that the company’s quarter and full-year results reflect “solid operating margin performance and cash generation at Ingalls and Newport News” and noted that the company achieved its long-standing goal in 2015 of attaining 9-plus percent operating margins for shipbuilding. HII was spun out of Northrop Grumman [NOC] in 2011.
Petters also said the current FY ’16 budget demonstrates broad support for the company’s Navy and Coast Guard shipbuilding programs and added the company is “pleased” that the Obama administration’s request for FY ’17 funds all key shipbuilding programs of record.
Backlog at the end of the year stood at $22 billion, up $600 million from a year ago, with $11 billion funded. Orders in the quarter were $700 million.