Huntington Ingalls Industries’ strong momentum in 2024 came to a halt in the third quarter due to challenges in shipbuilding and notably delays in an award from the Navy for submarine work.
Net income in the quarter slid 32% to $101 million, or $2.56 earnings a share from $148 million or $3.70 a share a year ago, well short of consensus estimates by $1.33 a share. Quarterly revenue was $2.7 billion.
Segment operating margin for shipbuilding tumbled to 3.5% versus 6.6% a year ago. Sales for shipbuilding were down 2% to $2.7 billion from $2.8 billion a year ago.
Through the first half of the year, the company’s net income and sales were up 26% and 6%, respectively, led by strong results at the Mission Technologies segment, the segment that coordinates business development with the Department of Energy, and supported by shipbuilding. In the third quarter, Mission Technologies performed well but both shipbuilding segments struggled.
HII is an integrated subcontractor to Los Alamos National Laboratory prime Triad Nuclear Security, providing personnel for nuclear operations and manufacturing at the New Mexico nuclear-weapons design lab. HII is also part of the joint venture Mission Support and Test Services, with Honeywell International and Jacobs Engineering Group, that manages the Nevada National Security Site.
In the company’s earnings call on Thursday with investor analysts, Huntington Ingalls Industries’ (HII) President and CEO Chris Kastner outlined two shipbuilding-related issues that crimped results and guidance. The first is a delay in an omnibus shipbuilding contract for 17 boats not yet under contract that include two Block V and 10 Block VI Virginia-class submarines, and five Columbia-class submarines.
That contract had been expected during the second half of 2024 to help address workforce and capacity issues at the company’s Newport News Shipbuilding segment, which builds nuclear submarines and aircraft carriers.
At the operating level in the quarter, sales were down in both shipbuilding segments on amphibious assault ships, the national security cutter, naval nuclear support, and unfavorable cumulative adjustments on Virginia-class submarines and aircraft carriers. Sales were higher at Mission Technologies on cyber, electronic warfare, and space work.
Operating income plummeted at Newport News on decreased performance on the Virginia-class vessels, in particular an unfavorable adjustment on Block IV boats, and aircraft carriers, and at Ingalls Shipbuilding due to performance on assault ships and destroyers. At Mission Technologies, operating earnings were strong on higher sales and income from joint ventures.
A version of this story first appeared in Exchange Monitor affiliate publication Defense Daily.
