Huntington Ingalls Industries Inc (NYSE:HII) shares are trading lower after it reported fourth-quarter FY24 results.

Sales and service revenue increased 5.4% year-over-year to $3.00 billion, missing the consensus of $3.05 billion.

Ingalls Shipbuilding $736 million (-8.0% Y/Y), Newport News Shipbuilding $1.59 billion (-4.6% Y/Y), and Mission Technologies $713 million (-4.3% Y/Y).

Operating income decreased 64.7% Y/Y to $110 million, and the margin contracted by 616 bps to 3.7%. Segment operating income was $103 million (-68.8% Y/Y), and the margin was 3.4%, down 696 bps Y/Y.

EPS of $3.15, down 54.3% Y/Y, missing the consensus of $3.31. 

Operating cash flow plunged to $393 million in 2024 and free cash flow to $40 million, compared to $970 million and $692 million, respectively, in 2023.

New contract awards for 2024 were $12.1 billion, with a total backlog of around $48.7 billion as of December 31, 2024.

Chris Kastner, president and CEO said, “We continue to make progress on ships put under contract pre-COVID, and are working diligently with our customers to put over $50 billion of new work under contract. Mission Technologies continued its strong track record of top line growth and margin expansion and secured an impressive $12 billion in total future contract value during 2024.”

FY25 Outlook: Huntington Ingalls Industries sees sales of around $11.80 billion – $12.20 billion (vs. consensus of $12.10 billion), with expected Shipbuilding revenue of $8.9 billion – $9.1 billion and the corresponding operating margin of 5.5% – 6.5%.

Huntington Ingalls sees Mission Technologies’ revenue of $2.9 billion – $3.1 billion, with an operating margin of 4.0% – 4.5% and EBITDA margin of 8.0% – 8.5%.

The company expects FY25 free cash flow of $300 million – $500 million.

Investors can gain exposure to the stock via The Advisors’ Inner Circle Fund III Strategas Global Policy Opportunities ETF (NYSE:SAGP).

Price Action: HII shares are down 16.5% at $163.23 at the last check Thursday.

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