Low-Margin Days are Over at Huntington Ingalls (HII), Drexel Hamilton Upgrades to Buy

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Drexel Hamilton upgraded Huntington Ingalls (NYSE: HII) from Hold to Buy with a price target of $47.00.

Earnings risk from low-margin “problem programs” is rapidly declining, and as risk from these programs abates, the likelihood of margins increasing at Ingalls unit rises, which should drive double-digit earnings growth for the company overall for the next three years, thinks analyst Peter Skibitski.

Skibitski believes these problem programs represent roughly 16% of sales in 2012, and will decline to 8% in 2013 and 0% in 2014.

“We believe margins at Ingalls can ramp from 4% in 2012 to 6.4% in 2015, with our 2015 EPS forecast greater than $5,” he said.

For an analyst ratings summary and ratings history on Huntington Ingalls click here. For more ratings news on Huntington Ingalls click here.

Shares of Huntington Ingalls closed at $40.23 yesterday, with a 52 week range of $22.62-$41.55.

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