Miller Tabak Starts Huntington Ingalls (HII) at Buy, Sees Improving Margins From Gulf Coast Shipyards
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Price: $327.71 +0.60%
Rating Summary:
10 Buy, 12 Hold, 0 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
Rating Summary:
10 Buy, 12 Hold, 0 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
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Miller Tabak initiates coverage on shares of Huntington Ingalls (NYSE: HII) with a Buy rating and $45 price target based on three reasons.
The first reason is because the firm believes that shares of HII are only trading at a multiple of 5.7x its FY12 EBITDA compared to the company’s comp group comprised of General Dynamics, Lockheed Martin and Raytheon which are trading at an average multiple of 6.5x FY 2011 EBITDA.
Second, Miller Tabak anticipates that the company will begin to see improving EBIT margins throughout the next five years in the Gulf Coast shipyards. This comes as unprofitable projects at its Avondale shipyard are wound down, and as the Gulf Coast yards are consolidated, completion is expected in 2013.
HII has had EBITDA margins of 11.6% for the last two years in its Newport News yards, while it has only been a 0.6% margin in its Gulf Coast yards over the same period. General Dynamics (NYSE: GD), HII's major competitor, has been experiencing an average EBIT margin of 9.9% in its Marine Systems division over the past three years.
The last reason reflects the firms belief that the stock may come under technical selling pressure over the next 1-3 weeks from Northrop Grumman (NYSE: NOC) shareholders who do not or cannot hold HII shares. Miller Tabak sees this opening an attractive entry point for investors in the near future.
For more ratings news on Huntington Ingalls click here and for the rating history of Huntington Ingalls click here.
Shares of Huntington Ingalls closed at $38.20 yesterday.
The first reason is because the firm believes that shares of HII are only trading at a multiple of 5.7x its FY12 EBITDA compared to the company’s comp group comprised of General Dynamics, Lockheed Martin and Raytheon which are trading at an average multiple of 6.5x FY 2011 EBITDA.
Second, Miller Tabak anticipates that the company will begin to see improving EBIT margins throughout the next five years in the Gulf Coast shipyards. This comes as unprofitable projects at its Avondale shipyard are wound down, and as the Gulf Coast yards are consolidated, completion is expected in 2013.
HII has had EBITDA margins of 11.6% for the last two years in its Newport News yards, while it has only been a 0.6% margin in its Gulf Coast yards over the same period. General Dynamics (NYSE: GD), HII's major competitor, has been experiencing an average EBIT margin of 9.9% in its Marine Systems division over the past three years.
The last reason reflects the firms belief that the stock may come under technical selling pressure over the next 1-3 weeks from Northrop Grumman (NYSE: NOC) shareholders who do not or cannot hold HII shares. Miller Tabak sees this opening an attractive entry point for investors in the near future.
For more ratings news on Huntington Ingalls click here and for the rating history of Huntington Ingalls click here.
Shares of Huntington Ingalls closed at $38.20 yesterday.
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