| HII (NYSE: HII) today reported results for the third quarter of fiscal 2024 and provided an update on its outlook. |
| Highlights |
| • Third quarter revenues were $2.7 billion |
| • Third quarter net earnings were $101 million or $2.56 diluted earnings per share |
| • Third quarter free cash flow1 was $136 million |
| • The company is providing an updated fiscal 2024 outlook |
| • Company is withdrawing 5-year free cash flow1 outlook |
| Third Quarter Results |
| Third-quarter 2024 revenues of $2.7 billion were down 2.4% from the third quarter of 2023, driven by lower volume at Ingalls Shipbuilding and Newport News Shipbuilding, partially offset by growth at Mission Technologies. |
| Operating income in the third quarter of 2024 was $82 million and the operating margin was 3.0%, compared to $172 million and 6.1%, respectively, in the third quarter of 2023. The decreases were primarily driven by lower segment operating income1 compared to the prior year. |
| Segment operating income1 in the third quarter of 2024 was $97 million and segment operating margin1 was 3.5%, compared to $187 million and 6.6%, respectively, in the third quarter of 2023. The decreases were driven primarily by a performance at Newport News Shipbuilding, which included a net unfavourable cumulative adjustment of $78 million, as well as a lower performance at Ingalls Shipbuilding. |
| Net earnings in the quarter were $101 million, compared to $148 million in the third quarter of 2023. Diluted earnings per share in the quarter was $2.56, compared to $3.70 in the third quarter of 2023. |
| Net cash provided by operating activities in the quarter was $213 million and free cash flow1 was $136 million, compared to net cash provided by operating activities of $335 million and free cash flow1 of $293 million in the third quarter of 2023. |
| New contract awards in the third quarter of 2024 were $3.6 billion, bringing the total backlog to approximately |
| $49.4 billion as of September 30, 2024. Awards in the third quarter of 2024 included approximately $565 million related to the multi-ship amphibious award at Ingalls Shipbuilding. |
| Commentary on Third Quarter Results |
| “Two issues have impacted our results and guidance for the year," said Chris Kastner, HII’s president and CEO. |
| "First, based on constructive discussions with our Navy partner, we expected to reach an agreement for |
| Virginia-class Block V and Block VI and Columbia-class submarines in the second half of 2024. |
| "Starting this fall, some uncertainty emerged about the timing of that agreement. While we are confident an agreement will be reached and discussions continue, we have updated our profitability and cash flow assumptions based on the uncertain timing and structure of the award. |
| "We continue to pursue innovative contracting approaches that incentivize greater investments in our workforce, facilities and technology. These investments are critical to yield accelerated program schedules that meet the urgent needs of the Navy. |
| "Second, our assumptions of performance improvement and risk reduction have not been achieved, due to late critical material deliveries from the supply chain and reduced experience levels within our teams, |
| both in production touch labor and supervision. This leads to labour inefficiency, and in some cases to rework, which can affect program schedules. |
| "It bears repeating that nearly all of the ships currently under construction were negotiated before COVID, and since those contracts were signed we have seen a significant loss of shipbuilding experience in our yards. Those ship contracts, which we are still operating under at Newport News, did not anticipate in their cost targets and risk limiting clauses the significant disruption of our workforce and supply chain, or extended periods of heightened cost inflation. |
| “Let me be clear: delays and cost increases on these ships are unacceptable to me, my team, and all of us at HII. Looking ahead, we continue to take decisive actions to focus on the fundamentals of shipbuilding to ensure that we finish these ships, get them delivered to the Navy, and transition to ships negotiated in the context of our current economic reality. |
| "To summarize, we remain focused on optimizing our operations, improving our cost structure and shipbuilding performance, and driving higher throughput. We firmly believe the actions we are taking will enable us to stabilize performance as we continue to work through these ship contracts." |
| HII Financial Outlook |
| • FY24 shipbuilding revenue2 expected to be approximately $8.8B |
| • FY24 shipbuilding operating margin2 expected to be between 5.0% and 6.0% |
| • Increasing FY24 Mission Technologies expected revenue range to between $2.8B and $2.85B |
| • Increasing FY24 Mission Technologies expected operating margin2 to approximately 3.75% |
| • Capital expenditures are expected to be approximately 3.4% of sales |
| • FY24 free cash flow2,3 expected to be between $0M and $100M |
| • Withdrawing the previous five-year (2024-2028) free cash flow outlook |
| For the full document click the link below: |
| Huntington Ingalls Industries |
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