Bernstein increased Huntington Ingalls Industries' (NYSE: HII) price target to $341 from $337 while maintaining a Market Perform rating, citing improving margin prospects. The upgrade follows Wolfe Research's upgrade to Outperform with a $364 target.
Huntington Ingalls reported second-quarter diluted earnings per share of $5.27 on July 30, exceeding the consensus estimate of $3.81. Revenue reached $3.42 billion, surpassing expectations of $3.15 billion. The company attributed the beat to higher shipbuilding revenues and stronger-than-expected margins at its Newport News unit.
Analysts noted the company's valuation metrics, with HII trading at a P/E ratio of 17.5 and a PEG ratio of 0.68. Shares have declined 31.85% over the past six months.
The company raised its full-year shipbuilding revenue guidance to a range of $10.2 billion to $10.4 billion, up from the prior range of $9.7 billion to $9.9 billion. The midpoint implies an increase of approximately $500 million. Shipbuilding margin guidance was also adjusted, with the lower bound raised to a range of 6.0% to 6.5%, compared to the previous 5.5% to 6.5%.
Free cash flow guidance for the year was reaffirmed at between $500 million and $600 million, despite a first-half outflow of $611 million. Huntington Ingalls expects to generate over $1 billion in free cash flow in the fourth quarter of 2026, driven by incentive payments from a recent contract, R&D tax credits, and improved working capital.
The company and General Dynamics secured a $76.6 billion contract covering nine Virginia Block VI attack submarines, material for a tenth submarine, and five Columbia Build II ballistic submarines.
