Huntington Ingalls Industries (NYSE: HII) and Rockwell Collins (NYSE:COL) are both mid-cap aerospace companies, but which is the better investment? We will contrast the two companies based on the strength of their valuation, dividends, institutional ownership, risk, earnings, profitability and analyst recommendations.

Profitability

This table compares Huntington Ingalls Industries and Rockwell Collins’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Huntington Ingalls Industries 7.93% 31.12% 8.28%
Rockwell Collins 11.52% 26.20% 7.76%

Analyst Recommendations

This is a breakdown of current recommendations for Huntington Ingalls Industries and Rockwell Collins, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Huntington Ingalls Industries 2 4 2 0 2.00
Rockwell Collins 1 9 11 0 2.48

Huntington Ingalls Industries currently has a consensus price target of $202.17, suggesting a potential downside of 5.68%. Rockwell Collins has a consensus price target of $115.61, suggesting a potential downside of 7.39%. Given Huntington Ingalls Industries’ higher probable upside, analysts plainly believe Huntington Ingalls Industries is more favorable than Rockwell Collins.

Dividends

Huntington Ingalls Industries pays an annual dividend of $2.40 per share and has a dividend yield of 1.1%. Rockwell Collins pays an annual dividend of $1.32 per share and has a dividend yield of 1.1%. Huntington Ingalls Industries pays out 19.6% of its earnings in the form of a dividend. Rockwell Collins pays out 26.0% 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 2 consecutive years and Rockwell Collins has increased its dividend for 4 consecutive years. Huntington Ingalls Industries is clearly the better dividend stock, given its higher yield and lower payout ratio.

Institutional and Insider Ownership

86.6% of Huntington Ingalls Industries shares are held by institutional investors. Comparatively, 67.8% of Rockwell Collins shares are held by institutional investors. 2.2% of Huntington Ingalls Industries shares are held by insiders. Comparatively, 1.5% of Rockwell Collins shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Earnings & Valuation

This table compares Huntington Ingalls Industries and Rockwell Collins’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Huntington Ingalls Industries $7.19 billion 1.35 $1.03 billion $12.24 17.51
Rockwell Collins $6.07 billion 3.34 $1.35 billion $5.07 24.62

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

Risk and Volatility

Huntington Ingalls Industries has a beta of 1.18, indicating that its share price is 18% more volatile than the S&P 500. Comparatively, Rockwell Collins has a beta of 0.78, indicating that its share price is 22% less volatile than the S&P 500.

Summary

Huntington Ingalls Industries beats Rockwell Collins on 10 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 Rockwell Collins

Rockwell Collins, Inc. designs, produces and supports communications and aviation systems for commercial and military customers. The Company provides information management services through voice and data communication networks and solutions across the world. The Company operates through three segments: Commercial Systems, Government Systems and Information Management Services. The Commercial Systems segment supplies aviation electronics systems, products and services to customers located throughout the world. The Government Systems segment provides a range of electronic products, systems and services to customers including the United States Department of Defense, various ministries of defense, other government agencies and defense contractors around the world. The Information Management Services segment provides communications services, systems integration and security solutions across the aviation, airport, rail and nuclear security markets.

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