Contrasting Northrop Grumman (NOC) & Huntington Ingalls Industries (HII)

Huntington Ingalls Industries (NYSE: HII) and Northrop Grumman (NYSE:NOC) are both large-cap aerospace companies, but which is the better investment? We will compare the two businesses based on the strength of their earnings, risk, profitability, dividends, analyst recommendations, valuation and institutional ownership.

Insider & Institutional Ownership

84.2% of Huntington Ingalls Industries shares are held by institutional investors. Comparatively, 81.3% of Northrop Grumman shares are held by institutional investors. 2.2% of Huntington Ingalls Industries shares are held by insiders. Comparatively, 0.7% of Northrop Grumman shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Profitability

This table compares Huntington Ingalls Industries and Northrop Grumman’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Huntington Ingalls Industries 8.31% 33.37% 8.90%
Northrop Grumman 9.24% 39.76% 8.94%

Earnings & Valuation

This table compares Huntington Ingalls Industries and Northrop Grumman’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Huntington Ingalls Industries $7.07 billion 1.52 $573.00 million $13.24 17.90
Northrop Grumman $24.51 billion 2.17 $2.20 billion $13.42 22.78

Northrop Grumman has higher revenue and earnings than Huntington Ingalls Industries. Huntington Ingalls Industries is trading at a lower price-to-earnings ratio than Northrop Grumman, indicating that it is currently the more affordable of the two stocks.

Dividends

Huntington Ingalls Industries pays an annual dividend of $2.88 per share and has a dividend yield of 1.2%. Northrop Grumman pays an annual dividend of $4.00 per share and has a dividend yield of 1.3%. Huntington Ingalls Industries pays out 21.8% of its earnings in the form of a dividend. Northrop Grumman pays out 29.8% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Huntington Ingalls Industries has increased its dividend for 4 consecutive years and Northrop Grumman has increased its dividend for 9 consecutive years. Northrop Grumman is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility and Risk

Huntington Ingalls Industries has a beta of 1.17, suggesting that its stock price is 17% more volatile than the S&P 500. Comparatively, Northrop Grumman has a beta of 0.69, suggesting that its stock price is 31% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent ratings and price targets for Huntington Ingalls Industries and Northrop Grumman, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Huntington Ingalls Industries 2 3 2 0 2.00
Northrop Grumman 0 5 8 0 2.62

Huntington Ingalls Industries presently has a consensus target price of $212.67, indicating a potential downside of 10.27%. Northrop Grumman has a consensus target price of $296.92, indicating a potential downside of 2.86%. Given Northrop Grumman’s stronger consensus rating and higher possible upside, analysts clearly believe Northrop Grumman is more favorable than Huntington Ingalls Industries.

Summary

Northrop Grumman beats Huntington Ingalls Industries on 13 of the 17 factors compared between the two stocks.

About Huntington Ingalls Industries

Huntington Ingalls Industries, Inc. is a military shipbuilding company and a provider of professional services to partners in government and industry. The Company’s business consists of the design, construction, repair and maintenance of nuclear-powered ships and non-nuclear ships for the United States Navy and coastal defense surface ships for the United States Coast Guard, as well as the refueling and overhaul and inactivation of nuclear-powered ships for the United States Navy. It operates through three segments: Ingalls Shipbuilding (Ingalls), Newport News Shipbuilding (Newport News) and Technical Solutions. Its Ingalls segment includes its non-nuclear ship design, construction, repair and maintenance businesses. Its Newport News includes all of its nuclear ship design, construction, overhaul, refueling, and repair and maintenance businesses. Its Technical Solutions segment provides a range of professional services to the governmental, energy, and oil and gas markets.

About Northrop Grumman

Northrop Grumman Corporation is a global security company. The Company provides products, systems and solutions in autonomous systems; cyber; command, control, communications and computers, intelligence, surveillance and reconnaissance (C4ISR); strike, and logistics and modernization. The Company’s segments include Aerospace Systems, Mission Systems and Technology Services. The Company’s Aerospace Systems segment is engaged in the design, development, integration and production of manned aircraft, autonomous systems, spacecraft, high-energy laser systems, microelectronics and other systems/subsystems. The Mission Systems segment offers mission solutions and multifunction systems for Department of Defense (DoD), intelligence community, international, federal civil and commercial customers. The Technology Services segment provides logistics solutions supporting the full life cycle of platforms and systems for global defense and federal-civil customers.

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