Shipyard parent company sees jump in third quarter earnings
Third-quarter profits at Huntington Ingalls Industries jumped 53.7 percent from the same time last year, the company said Thursday, noting higher volumes at its Newport News and Gulf Coast shipyards.
Contract awards for the quarter included $187.5 million for Newport News Shipbuilding to begin advance planning for the midlife overhaul of the aircraft carrier John C. Stennis.
Ingalls Shipbuilding in Pascagoula, Miss., received a $5.1 billion multi-year deal for six Arleigh Burke-class destroyers; $1.8 billion for the first two ships is currently being exercised.
Net earnings for the quarter stood at $229 million, up from $149 million from the same three-month period in 2017, which accounts for the nearly 54 percent increase. Third-quarter revenues totaled $2.1 billion, nearly 12 percent higher than the third quarter a year ago. Operating margin was a healthy 13.9 percent.
Earnings per share of $5.29 beat Zack’s Consensus Estimate by nearly 28 percent. The estimate was $4.14.
At Newport News, the company attributed higher revenues to work on the midlife overhaul of the aircraft carrier George Washington and advance planning for the future USS Enterprise, also known as CVN-80.
Ingalls saw increased revenue from work on amphibious assault ships and Coast Guard cutters.
HII’s Technical Solutions division, which includes a number of non-shipbuilding units, also experienced an uptick in revenues: an increase of $4 million for a total $245 million. Highlights for Technical Solutions’ third quarter included a $34 million contract to provide engineering, technical, repair and logistical support to the U.S. Navy’s coastal riverine forces.
In a conference call with Wall Street analysts, HII President and CEO Mike Petters said he was “very encouraged” by support for shipbuilding in a 2019 spending bill signed by President Donald Trump that includes funding for the Defense Department.
The Navy is evaluating the possible savings of a block buy of aircraft carriers, which would cover the future Enterprise and as-yet-unnamed carrier. Petters declined to predict the timetable for that decision, but said, “we’re working really hard to do this as soon as we can.”
He cast doubt on another strategy to expand the carrier fleet: extending the life of the USS Nimitz.
The Pentagon is committed to expanding its carrier fleet from 11 to 12 as soon as possible. Discussion in Congress has focused on keeping the Nimitz active for a few more years, which would help with that numbers game as newer carriers came on line.
Petters compared the idea to maintaining an old car, where maintenance costs eventually become counterproductive.
“There is a point where every time you take the car in, it costs you a whole lot more than you thought it should,” he said.
“I would not be an advocate of that,” Petters said, referring to the life-extension idea. “I would argue the better way to increase the number of carriers in the fleet is to build them more frequently and efficiently.”