
A new report by consulting firm McAleese & Associates says investors expect Huntington Ingalls Industries (NYSE: HII) to return to 10 percent shipbuilding operating margins in 2019.
Jim McAleese, founder and principal at McAleese & Associates and a 2019 Wash100 winner, wrote in the report the figure could be driven by five ship deliveries this year and âEAC-risk-retirementâ profit increase expected from the launch of the CVN-79 Kennedy aircraft carrier in the fourth quarter of 2019.
HII saw its 2018 sales grow 10 percent to $8.2B, according to the report.
Meanwhile, CEO Mike Petters said Thursday at the companyâs earnings call that he expects HII to reach 9 percent to 10 percent shipbuilding margins by 2020.
HII also anticipates the inclusion of the potential 2020-2024Â LPD Flight IIÂ multi-year program in the U.S. Navyâs upcoming budget request for fiscal 2020 and now pushes for a two-ship buy of LHA-9 and LHA-10 America-class amphibious assault ships.
HII still invests 5 percent of its sales in capital expenditures, while investors call for cuts to CapEx by 2021 to protect the companyâs cash flow, according to the report.
McAleese noted that the Ingalls Shipbuilding business accounted for 32 percent of the parent companyâs total sales and 47 percent of the total sector profits, making it HIIâs âprofit engine.â
HIIâs âgrowth engineâ is Newport News Shipbuilding, which generated 58 percent of total sales and 49 percent of total sector profits, the report noted.
According to HIIâs Q4 and full-year 2018 financial results, HIIâs technical solutions business saw its 2018 revenue increase 3.8 percent to $988M and posted $32M in operating income, up from $21M in 2017.
In December, HII acquired Annapolis Junction, Md.-based cybersecurity services provider G2, which is now part of the technical solutions segment.