Huntington Ingalls Industries (NYSE: HII) and Arconic (NYSE:ARNC) are both large-cap industrials companies, but which is the better business? We will contrast the two businesses based on the strength of their valuation, dividends, profitability, earnings, institutional ownership, risk and analyst recommendations.

Analyst Ratings

This is a summary of current ratings and target prices for Huntington Ingalls Industries and Arconic, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Huntington Ingalls Industries 2 3 2 0 2.00
Arconic 0 2 4 0 2.67

Huntington Ingalls Industries presently has a consensus price target of $212.67, indicating a potential downside of 9.07%. Arconic has a consensus price target of $29.17, indicating a potential upside of 16.71%. Given Arconic’s stronger consensus rating and higher probable upside, analysts plainly believe Arconic is more favorable than Huntington Ingalls Industries.

Dividends

Huntington Ingalls Industries pays an annual dividend of $2.88 per share and has a dividend yield of 1.2%. Arconic pays an annual dividend of $0.24 per share and has a dividend yield of 1.0%. Huntington Ingalls Industries pays out 21.7% of its earnings in the form of a dividend. Arconic pays out -15.1% 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. Huntington Ingalls Industries is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings and Valuation

This table compares Huntington Ingalls Industries and Arconic’s top-line 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 1.50 $573.00 million $13.28 17.61
Arconic $12.39 billion 0.97 -$941.00 million ($1.59) -15.72

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

Risk and Volatility

Huntington Ingalls Industries has a beta of 1.17, meaning that its share price is 17% more volatile than the S&P 500. Comparatively, Arconic has a beta of 0.85, meaning that its share price is 15% less volatile than the S&P 500.

Institutional & Insider Ownership

84.2% of Huntington Ingalls Industries shares are held by institutional investors. Comparatively, 74.7% of Arconic shares are held by institutional investors. 2.2% of Huntington Ingalls Industries shares are held by company insiders. Comparatively, 0.1% of Arconic shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Profitability

This table compares Huntington Ingalls Industries and Arconic’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%
Arconic -4.70% 9.71% 2.73%

Summary

Huntington Ingalls Industries beats Arconic on 11 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 Arconic

Arconic Inc., formerly Alcoa Inc., is engaged in lightweight metals engineering and manufacturing. The Company operates through three segments: Global Rolled Products, Engineered Products and Solutions, and Transportation and Construction Solutions. Its multi-material products, which include aluminum, titanium and nickel, are used around the world in markets, such as aerospace, automotive, commercial transportation and packaging. The Global Rolled Products segment produces a range of aluminum sheet and plate products for the aerospace, automotive, commercial transportation, brazing and industrial markets. The Engineered Products and Solutions segment develops and manufactures products for the aerospace (commercial and defense), commercial transportation and power generation end markets. The Transportation and Construction Solutions segment produces products that are used in the non-residential building and construction and commercial transportation end markets.

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