Seeking Alpha

Huntington Ingalls upgraded to Buy at UBS, stock already reflects worse case

Huntington Ingalls (HII +1.4%) is upgraded to Buy from Hold with a $109 price target at UBS, which believes the stock price already reflects the worst case.

UBS says recent underperformance leaves the stock pricing in relatively flat EPS of ~$8 for remainder of the decade, but the firm sees the compound annual growth rate of mid-single-digits to ~$10 in 2016-18 as more likely with upside potential to $14 if the top line sustains and margins move up in line with GD Marine Systems.

HII is appealing in a valuation standpoint, the firm says, with a PE multiple near 9x; HII likely will raise its EBIT margin within its core segment by 9% or more over the next 12 months.

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