S&P cuts Huntington Ingalls

S&P said it lowered the ratings on Huntington Ingalls Industries Inc. and its unsecured notes, except for the Northrop Grumman guaranteed industrial revenue bonds, to BBB- from BBB.

“Huntington Ingalls' earnings and cash flow are likely to be weaker than we had expected in 2021 and 2022. Although we had expected earnings to decline in 2021 due to a change in how the company determines its pension costs under government contracts, we now believe the decline will be more significant as a result of lower profitability on the Virginia-class submarine program, the lingering impacts of pandemic-related disruptions in 2020 and lower revenue expectations for the technical services (TS) segment,” the agency said in a press release.

S&P now forecasts funds from operations (FFO) to debt of 25%-30% in 2021, compared to previous expectations of 40%-45%. This ratio should improve to 35%-40% in 2022 as the change in pension costs on earnings abates and performance improves certain programs, the agency said.

The outlook is stable.

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