Valued at a market cap of $8.8 billion, Huntington Ingalls Industries, Inc. (HII) designs, builds, overhauls, and repairs military ships. In addition to shipbuilding, this Newport News, Virginia-based company also provides cutting-edge defense solutions, including cyber operations, artificial intelligence, and unmanned systems, playing a vital role in advancing U.S. national security.

Shares of this military shipbuilding company have lagged behind the broader market over the past 52 weeks. HII has declined 11.1% over this time frame, while the broader S&P 500 Index ($SPX) has gained 10.2%. Nonetheless, on a YTD basis, the stock is up 18.9%, outpacing SPX’s 1.3% downtick. 

Narrowing the focus, HII has also considerably underperformed the SPDR S&P Aerospace & Defense ETF’s (XAR) 31.4% return over the past 52 weeks. However, it has outperformed the ETF’s 12.2% rise on a YTD basis. 

On May 1, shares of HII plunged 1.2% after its mixed Q1 earnings release. The company’s sales and service revenue declined 2.5% year-over-year to $2.7 billion and fell short of the consensus estimates by 2.2%. Weaker sales across all three of its reportable segments, with the Newport News Shipbuilding division experiencing the largest drop at 2.6%, affected its overall top line. However, on the brighter side, while its EPS of $3.79 fell 2.1% from the year-ago quarter, it topped the forecasted figure by a notable margin of 30.7%. Higher segment operating income, driven by effective cost savings initiatives, supported its profitability.

For the current fiscal year, ending in December, analysts expect HII’s EPS to grow 2.5% year over year to $14.31. The company’s earnings surprise history is mixed. It exceeded the consensus estimates in two of the last four quarters, while missing on two other occasions.

Among the 10 analysts covering the stock, the consensus rating is a “Hold” which is based on two “Strong Buy,” seven “Hold,” and one “Moderate Sell” rating. 

This configuration is more bullish than two months ago, with one analyst suggesting a “Strong Buy” rating, and one recommending “Strong Sell.” 

On May 15, Alembic Global upgraded HII’s rating to “Overweight” with a  price target of $265, which indicates a 17.9% potential upside from the current levels. 

The mean price target of $238.09 represents a 5.9% premium from HII’s current price levels, while the Street-high price target of $286 suggests an upside potential of 27.3%.