Huntington Ingalls Has a Clear Growth Trajectory Despite Budgetary Uncertainty; Shares Undervalued

Narrow-moat rated Huntington Ingalls Industries posted a decent fourth quarter as the firm laps a difficult comparable quarter in 2020. Sales of $2.7 billion beat FactSet consensus by 0.9%, but earnings per share of $2.99 missed the same estimates by 1.4%. After incorporating fourth-quarter earnings into our model, we are increasing our fair value estimate for Huntington Ingalls to $214 per share from $195, primarily due to our assumption that corporate tax increases will not occur, though this effect was partially offset by higher assumed working capital and the capitalization of research and development expenditures. We think the shares are somewhat undervalued.