JPMorgan (NYSE:JPM) has adjusted its stance on Huntington Ingalls (NYSE:HII) Industries, the largest military shipbuilding company in the United States, shifting the rating from "Overweight" to "Neutral."
The firm, which specializes in the construction of a variety of military ships, including aircraft carriers and submarines, also increased its price target for the company's stock to $285, up from the previous $280.
The downgrade comes amid concerns about near-term confidence due to recent performance issues.
JPMorgan noted that while there is strong demand for Navy ships, which presents a long-term opportunity, this potential is contingent upon improved labor productivity at Huntington Ingalls and its suppliers.
In other recent news, Huntington Ingalls Industries' second-quarter revenue for 2024 reached a record $3 billion, marking a 6.8% increase over the previous year.
HII's diluted earnings per share also rose to $4.38, up from $3.27 in the same quarter of 2023. New contract awards for the quarter amounted to $3.1 billion, contributing to a robust backlog of contracts worth $48.5 billion.
HII has also secured significant contracts recently. The company was awarded a task order exceeding $30 million to support the U.S. Air Force's presidential and executive aircraft fleet. HII also won a $209 million contract for the support of the U.S. Air Force's fighter and bomber weapons systems. Both contracts will be managed by the Air Force Life Cycle Management Center.
InvestingPro Insights
As JPMorgan adjusts its rating on Huntington Ingalls Industries (NYSE:HII), investors may find additional context in real-time data and insights from InvestingPro. The company boasts a steady market cap of $10.56B and trades at a P/E ratio of 14.27, which is attractive relative to its near-term earnings growth. This aligns with the InvestingPro Tip that HII is trading at a low P/E ratio in comparison to its earnings growth potential. Furthermore, Huntington Ingalls has demonstrated a commitment to shareholder returns, having raised its dividend for 12 consecutive years, a testament to its financial stability and a point of interest for income-focused investors.
However, it's important to note that five analysts have revised their earnings expectations downwards for the upcoming period, indicating potential headwinds that may align with JPMorgan's cautious stance. Additionally, the company's gross profit margins are considered weak, sitting at 14.56% for the last twelve months as of Q2 2024. This could be a factor in the shipbuilding margin and cash flow concerns raised by JPMorgan.
For those seeking a deeper dive into Huntington Ingalls' financials and future outlook, InvestingPro offers further exclusive tips and metrics. The platform currently lists an additional 13 InvestingPro Tips, providing a more comprehensive analysis for informed investment decisions.
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