Huntington Ingalls Industries Ratings Affirmed Following UCO Review; Outlook Stable

  • Huntington Ingalls continues to have strong credit metrics and a large backlog that provides long-term visibility into the company's revenues.
  • We are affirming our 'BBB' issuer credit and unsecured debt ratings on the warship builder and removing them from under criteria observation.
  • The stable outlook reflects our view that credit metrics will remain fairly stable in 2019, with funds from operations to debt above 60%.
WASHINGTON D.C. (S&P Global Ratings) April 15, 2019—S&P Global Ratings today 
took the above listed rating actions. We have completed our review of our 
ratings on Huntington Ingalls Industries Inc., which were designated "under 
criteria observation" (UCO) after publishing our revised "Ratios And 
Adjustments," criteria on April 1, 2019. With our criteria review complete, we 
are removing the UCO designation from these ratings and affirming them. 


Our stable outlook reflects our expectation that the company's credit metrics 
will be fairly stable over the next year as profitability moderates but cash 
flows remain strong and stock repurchases decline from last year's very high 
levels. We expect this to result in FFO to debt of above 60% in 2019. It also 
reflects management's commitment to maintaining credit measures consistent 
with current rating.


We could lower our rating on Huntington Ingalls if the company pursues a large 
acquisition that materially increases leverage (FFO to debt below 45% on a 
sustained basis) without significantly improving the company's competitive 
position. We could also lower the rating if funding for its shipbuilding 
declines significantly from our current expectations, or if increased share 
repurchases or dividends cause FFO to debt to decline below 45% on a sustained 
basis.


Although unlikely, we could raise our rating on Huntington Ingalls if the 
company significantly improves its program and customer diversity through 
acquisitions while maintaining debt to EBITDA under 1.5x, with FFO to debt 
above 50% on a sustained basis.
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