Huntington Ingalls At 52-Week High On Promising Outlook

Shares of Huntington Ingalls Industries, Inc. (NYSE:HII) touched a new 52-week high of $173.42 on Jul 8, finally closing a little lower at $172.52. In fact, the largest U.S. military shipbuilder’s stock has surged about 37% so far this year, outperforming the S&P 500 peer group average of 4.2% over the same time frame.

Huntington Ingalls has a market cap of $8.11 billion. Over the past 52 weeks, the company’s shares have ranged from a low of $102.76 to a high of $173.42. Average volume of shares traded over the last three months is approximately 3.2 million.

What’s Driving Huntington Ingalls?

Huntington Ingalls is the sole designer and manufacturer of nuclear-powered aircraft carriers in the U.S. The company is also the prime industrial employer in Virginia. More than 70% of the active U.S. Navy fleet consists of Huntington Ingalls ships.

Notably, the company’s management maintains stable liquidity and capital resources to fund operations. Net cash from operating activities in the first quarter increased 440% to $54 million from $10 million a year ago. Free cash flow was $17 million versus free cash outflow of $10 million a year ago.

In addition, the company focuses on maximizing shareholder value through both share repurchases and incremental dividend payouts. During the first quarter of 2016, the company paid $24 million as dividends, up from $19 million a year ago. It also repurchased common stock worth $44 million during the quarter, up from $29 million in the year-ago period.

It is also worth mentioning that the shipbuilding business outlook continues to be strong with the implementation of the fiscal 2016 budget and the fiscal 2017 proposal. A number of Huntington Ingalls’ shipbuilding programs have been funded by the 2016 budget. Moreover, the proposed fiscal 2017 budget includes funding for other programs, indicating that Huntington Ingalls is quite well positioned for long-term growth. Besides, multi-year stability in shipbuilding would likely lead to robust cash flows.

Huntington Ingalls currently has a Zacks Rank #3 (Hold).

Stocks to Consider

A few better-ranked stocks in the defense space include Northrop Grumman Corp. (NYSE:NOC) , Raytheon Company (NYSE:RTN) and Rockwell Collins Inc. (NYSE:COL) , each carrying a Zacks Rank #2 (Buy).

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