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Huntington Ingalls Industries (HII)
NYSE:HII
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Huntington Ingalls
(NYSE:HII)
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Rating:67Neutral
Price Target:
$482.00
â–²(6.23% Upside)
Action:DowngradedDate:02/06/26
The score is driven primarily by solid fundamentals (steady growth, improved leverage, strong 2025 cash generation) tempered by margin and cash-flow volatility. The earnings call supports a constructive medium-term outlook but flags meaningful program execution, capex, and near-term cash timing risks. Technicals and valuation are the main secondary drags, reflecting weaker near-term price action and a relatively high P/E with a modest dividend.
Positive Factors
Market position & backlog
HII's large, government-backed awards and backlog give multi-quarter revenue visibility and reduce demand cyclicality. As the largest U.S. military shipbuilder with sustained appropriations support, this underpins predictable contract flow and capacity planning over the medium term.
Improved cash generation
A material rebound in 2025 operating and free cash flow strengthens liquidity and funds reinvestment and dividends. Strong FCF supports capital spending for throughput growth and cushions execution hiccups, though conversion history is choppy and requires monitoring.
Throughput gains and workforce build
Sustained throughput improvement and large hiring programs materially increase production capacity and execution capability. Higher skilled headcount and throughput support long-term delivery cadence, potential unit-cost dilution improvement and steadier program execution over coming years.
Negative Factors
Shipbuilding margin pressure
Flat near-term margin guidance signals constrained ability to expand shipbuilding profitability absent material throughput or contract mix changes. Structural reliance on fixed-price and cost-plus dynamics, plus program complexity, means margins may remain compressed until sustained efficiency or pricing improvements occur.
Program execution risk at Newport News
Significant negative cumulative adjustments and out-of-sequence work on major carrier programs highlight persistent execution and schedule risk. Such program-level overruns can materially increase costs, erode margins, and create multi-quarter cash timing variability given the scale and complexity of CVN contracts.
Elevated capex and capital intensity
Rising capital expenditures to support higher submarine and carrier throughput increase funding needs and pressure near-term free cash flow. Ongoing yard investments reduce financial flexibility and may necessitate external partnerships or slower shareholder returns until throughput gains materialize.
Huntington Ingalls (HII) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$17.81B
Dividend Yield1.53%
Average Volume (3M)539.17K
Price to Earnings (P/E)28.9
Beta (1Y)0.78
Revenue Growth2.60%
EPS Growth-18.22%
CountryUS
Employees44,000
SectorIndustrials
Sector Strength72
IndustryAerospace & Defense
Share Statistics
EPS (TTM)4.04
Shares Outstanding39,242,687
10 Day Avg. Volume438,120
30 Day Avg. Volume539,169
Financial Highlights & Ratios
PEG Ratio2.16
Price to Book (P/B)2.63
Price to Sales (P/S)1.07
P/FCF Ratio16.83
Enterprise Value/Market Cap1.10
Enterprise Value/Revenue1.57
Enterprise Value/Gross Profit12.40
Enterprise Value/Ebitda16.23
Forecast
1Y Price Target
$420.67Price Target Upside-7.29% Downside
Rating ConsensusModerate Buy
Number of Analyst Covering7
EPS Forecast (FY)17.28
Revenue Forecast (FY)$12.90B
Huntington Ingalls Business Overview & Revenue Model
Company DescriptionHuntington Ingalls Industries, Inc. engages in designing, building, overhauling, and repairing military ships in the United States. It operates through three segments: Ingalls Shipbuilding, Newport News Shipbuilding, and Technical Solutions. The company is involved in the design and construction of non-nuclear ships comprising amphibious assault ships; expeditionary warfare ships; surface combatants; and national security cutters for the U.S. Navy and U.S. Coast Guard. It also provides nuclear-powered ships, such as aircraft carriers and submarines, as well as refueling and overhaul, and inactivation services of ships. In addition, the company offers naval nuclear support services, including fleet services comprising design, construction, maintenance, and disposal activities for in-service the U.S. Navy nuclear ships; and maintenance services on nuclear reactor prototypes. Further, it provides life-cycle sustainment services to the U.S. Navy fleet and other maritime customers; high-end information technology and mission-based solutions for Department of Defense (DoD), intelligence, and federal civilian customers; nuclear management and operations and environmental management services for the Department of Energy, DoD, state and local governments, and private sector companies; defense and federal solutions; and unmanned systems. Huntington Ingalls Industries, Inc. was founded in 1886 and is headquartered in Newport News, Virginia.
How the Company Makes MoneyHuntington Ingalls generates revenue primarily through contracts with the U.S. government, particularly the Department of Defense. The company’s revenue model is largely based on fixed-price and cost-plus contracts, which provide stability and predictability in earnings. Key revenue streams include shipbuilding activities, which account for a significant portion of their income, as well as services related to maintenance, repair, and modernization of naval vessels. Additionally, HII engages in partnerships with various defense agencies and other contractors, enhancing its capabilities and expanding its service offerings. The consistent demand for military vessels and related services, along with ongoing government defense budgets, contribute significantly to HII's financial performance.
Huntington Ingalls Key Performance Indicators (KPIs)
Huntington Ingalls Earnings Call Summary
Earnings Call Date:Feb 05, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:Apr 30, 2026
Earnings Call Sentiment Positive
The call was broadly positive: Huntington Ingalls reported solid top-line growth, record divisional revenues, improved operating performance across segments, strong free cash flow above guidance, major program deliveries and product milestones, and raised medium-term shipbuilding growth expectations. At the same time, material timing, program-level negative cumulative adjustments (notably at Newport News for CVN 80/81), near-term margin conservatism, elevated capex needs, and the importance of timely contract awards are meaningful execution risks that could temper how quickly margins and returns improve. Overall the company appears to be making measurable operational progress while still managing program and timing headwinds.Q4-2025 Updates
Positive Updates
Consolidated Revenue and EPS Growth
2025 revenues of $12.5 billion, up 8.2% year-over-year; net earnings $605 million vs $550 million in 2024; diluted EPS $15.39 vs $13.96 in 2024 (≈10.2% increase).
Record Division Revenues and Backlog / Awards
All three divisions reached record revenue levels in 2025; 2025 awards totaled $16.9 billion and backlog/funding momentum supported by FY2026 NDAA and appropriations (incremental funding for CVNs, Columbia and Virginia class programs).
Strong Quarter and Segment Operating Improvement
Q4 2025 revenues of $3.5 billion, up ~16% YoY; Q4 segment operating income $195 million (5.6% margin) vs $103 million (3.4%) in Q4 2024 — across all segments operating results improved versus prior year.
Mission Technologies Milestones and Profitability Gains
Mission Technologies posted record revenues topping $3.0 billion (2025 revenues $3.0B, +3.6% YoY), operating income $153 million (margin 5.0% vs 3.9% in 2024), EBITDA margin 8.6% vs 7.9% in 2024, and lower purchased intangible amortization ($89M vs $99M). Notable program wins and product milestones include high-energy laser development, Grimm EW, Romulus USVs, and delivery of the 750th Remus AUV.
Shipbuilding Throughput and Hiring Progress
Company achieved a 14% increase in shipbuilding throughput in 2025 and hired over 6,600 shipbuilders in 2025 (expects at least same in 2026); attrition improved ~15–18% year-over-year across shipyards and throughput target for 2026 is +15%.
Key Deliveries, Launches and Program Milestones
Delivered DDG 128 Ted Stevens and SSN 798 Massachusetts (2025); launched DDG 129 and SSN 800; completed DDG 1000 sea trials; christened LPD 30 Harrisburg; delivered bow of Columbia SSBN 826; progress on CVN 79/80/81 with CVN 80 50% erected and CVN 79 moving toward preliminary acceptance.
Free Cash Flow and Liquidity Strength
2025 free cash flow of $800 million (above guidance); ended 2025 with $774 million cash and ~$2.5 billion liquidity; 2026 free cash flow guidance $500–$600 million and combined midpoint 2025–26 FCF of $1.35 billion (up vs prior two-year target).
Updated Medium-Term Growth and Increased Guidance
Raised medium-term shipbuilding revenue growth guidance from ≈4% to ≈6%; consolidated medium-term top-line CAGR now ~6% (shipbuilding ~6%, Mission Technologies ~5%), with incremental upside expected from recently announced frigate and battleship programs.
Negative Updates
Shipbuilding Margin Pressure and Flat Near-Term Margin Outlook
2025 shipbuilding margin 5.9%; 2026 shipbuilding margin guidance 5.5%–6.5% (essentially flat vs 2025). Management highlighted continued choppy margin progression and conservatism in near-term guidance with reliance on throughput improvements and new contract awards to drive future margin gains.
Negative Cumulative Adjustments at Newport News (CVN Programs)
Net cumulative adjustments for 2025 were negative $28 million; Newport News had negative adjustments of ~$64 million (included adjustments related to CVN 80 and CVN 81) which pressured 2025 results and underscores program-level risk.
Schedule / Cost Issues on Carrier Programs
CVN 80 experienced out-of-sequence work and schedule impacts requiring overtime and additional investments to recover sequence; management noted negative EACs on the CVN program in prior periods and ongoing recovery efforts — these dynamics increase near-term costs.
Timing Pull-Forward of Material and Revenue Volatility
Some sales/material timing moved into 2025 that were expected in 2026, resulting in 2026 shipbuilding revenue outlook of $9.7–$9.9 billion and contributing to quarter-to-quarter choppiness and conservative early-year guidance.
Capital Intensity and Elevated CapEx Requirements
2025 capex was $396 million (3.2% of sales); 2026 capex expected to step up to ~4–5% of sales (~$500–$600M) with additional capital required at Newport News to support higher submarine and carrier throughput — company may seek Navy partnership for some investments.
Contract Timing and Execution Risk for Key Awards
Management emphasized the need to finalize next Virginia class (Block VI) and Columbia class contracts in H1 2026 to avoid production schedule risk; negotiations are complex and delays would create execution and planning uncertainty.
Short-Term Cash Flow Seasonality / Q1 2026 Use
Consistent cash cadence: management expects Q1 2026 free cash flow to be negative, representing a use of approximately $600 million as some Q4 working capital benefits unwind, increasing near-term cash volatility.
No Share Repurchases and Ongoing Dividend Payouts
Company paid $213 million in dividends in 2025 but did not repurchase shares; management prioritized reinvestment in yards and operational needs over buybacks despite stronger free cash flow.
Company Guidance
Management's 2026 guidance called for shipbuilding revenues of $9.7–$9.9 billion with shipbuilding margins of 5.5%–6.5%, Mission Technologies revenues of $3.0–$3.2 billion with ~5% operating margin and 8.4%–8.6% EBITDA margin, consolidated medium‑term top‑line CAGR of ~6% (shipbuilding ~6%, Mission Technologies ~5%), 2026 free cash flow of $500–$600 million (Q1 free‑cash‑flow use ≈$600 million), 2026 capital expenditures of ~4%–5% of sales (~$500–$600 million), an effective tax rate of ~17%, Q1 2026 shipbuilding revenue ≈$2.3 billion and Mission Technologies revenue ≈$700–$750 million, a 2026 throughput target of +15% (after +14% in 2025), hiring at least 6,600 workers in 2026, planned outsourcing growth of ~30% (after a 100% increase in 2025), and combined 2025–2026 free cash flow at the midpoint of ≈$1.35 billion.Huntington Ingalls Financial Statement Overview
Summary
Steady multi-year revenue growth and a de-risking balance sheet (debt-to-equity down materially) support a solid financial profile. Offsetting this, profitability shows margin volatility (including an atypical 2025 gross margin pattern), and cash-flow conversion has been inconsistent despite a strong 2025 free-cash-flow rebound.Income Statement
Revenue has grown steadily from $9.36B (2020) to $12.48B (2025), with an acceleration in 2025 (about 4% growth). Profitability is moderate and fairly stable, with net margin generally in the ~5–7% range (about 4.8% in 2025). A key concern is margin volatility: operating profitability and gross margin weaken noticeably versus earlier years, and 2025 shows unusually high gross margin versus the prior-year pattern, suggesting potential inconsistency in cost/revenue recognition or mix that warrants caution.73
Positive
Balance Sheet
Leverage looks manageable and improving: debt-to-equity declines from ~1.24x (2021) to ~0.58x (2025), alongside rising equity ($2.81B in 2021 to $5.07B in 2025). Returns on equity remain solid (roughly 12–19% in recent years, ~12% in 2025), indicating the business is still generating reasonable profits on the capital base. The main watch-out is that returns have come down from prior peaks and the company still carries a meaningful debt load ($2.92B in 2025).71
Positive
Cash Flow
Cash generation strengthened materially in 2025: operating cash flow rose to $1.20B (from $393M in 2024) and free cash flow rebounded sharply to $1.20B (from $26M in 2024). Cash flow quality in 2025 is strong, with free cash flow roughly matching net income, but the history is choppy—2024 saw very weak free cash flow versus earnings—so the consistency of conversion from profits into cash is the primary risk.78
Positive
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 12.48B | 11.54B | 11.45B | 10.68B | 9.52B |
| Gross Profit | 1.58B | 1.45B | 1.65B | 1.44B | 1.37B |
| EBITDA | 1.21B | 1.06B | 1.29B | 1.18B | 1.00B |
| Net Income | 605.00M | 550.00M | 681.00M | 579.00M | 544.00M |
Balance Sheet | |||||
| Total Assets | 12.75B | 12.14B | 11.21B | 10.86B | 10.63B |
| Cash, Cash Equivalents and Short-Term Investments | 774.00M | 831.00M | 430.00M | 467.00M | 627.00M |
| Total Debt | 3.15B | 3.41B | 2.67B | 3.15B | 3.49B |
| Total Liabilities | 7.68B | 7.47B | 7.12B | 7.37B | 7.82B |
| Stockholders Equity | 5.07B | 4.67B | 4.09B | 3.49B | 2.81B |
Cash Flow | |||||
| Free Cash Flow | 794.00M | 26.00M | 678.00M | 482.00M | 429.00M |
| Operating Cash Flow | 1.20B | 393.00M | 970.00M | 766.00M | 760.00M |
| Investing Cash Flow | -521.00M | -348.00M | -236.00M | -268.00M | -1.95B |
| Financing Cash Flow | -732.00M | 356.00M | -771.00M | -658.00M | 1.31B |
Huntington Ingalls Technical Analysis
Positive
453.73
Price Trends
397.34
Positive
350.69
Positive
301.50
Positive
Market Momentum
14.05
Negative
64.80
Neutral
82.19
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For HII, the sentiment is Positive. The current price of 453.73 is above the 20-day moving average (MA) of 420.81, above the 50-day MA of 397.34, and above the 200-day MA of 301.50, indicating a bullish trend. The MACD of 14.05 indicates Negative momentum. The RSI at 64.80 is Neutral, neither overbought nor oversold. The STOCH value of 82.19 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for HII.
Huntington Ingalls Risk Analysis
Huntington Ingalls disclosed 30 risk factors in its most recent earnings report. Huntington Ingalls reported the most risks in the "Production" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Huntington Ingalls Peers Comparison
UnderperformOutperform
Sector (63)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
77 Outperform | $109.00B | 24.91 | 26.17% | 1.55% | -0.14% | 72.35% | |
75 Outperform | $70.69B | 42.76 | 8.20% | 1.61% | 2.83% | 47.00% | |
74 Outperform | $98.63B | 23.10 | 17.66% | 1.73% | 11.86% | 17.39% | |
74 Outperform | $155.70B | 30.63 | 76.87% | 2.77% | 2.88% | -35.15% | |
68 Neutral | $17.53B | 19.31 | 12.24% | 0.09% | 1.83% | -0.73% | |
67 Neutral | $17.81B | 28.88 | 12.42% | 1.53% | 2.60% | -18.22% | |
63 Neutral | $10.79B | 15.43 | 7.44% | 2.01% | 2.89% | -14.66% |
* Industrials Sector Average
HII
Huntington Ingalls
453.73
284.59
168.25%
GD
General Dynamics
364.78
118.73
48.25%
LHX
L3Harris Technologies
378.48
174.45
85.50%
LMT
Lockheed Martin
676.70
239.82
54.89%
NOC
Northrop Grumman
768.02
311.53
68.24%
TXT
Textron
100.68
30.56
43.58%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.