Huntington Ingalls Industries, Inc.

What they do

HII designs, builds, overhauls and maintains ships for the U.S. Navy and U.S. Coast Guard, and provides defense technology services. Ingalls in Pascagoula, Mississippi handles non-nuclear ships; Newport News in Virginia handles all nuclear ship design, construction, overhaul and refueling. Mission Technologies supplies C5ISR, cyber, AI/ML, unmanned systems and training solutions. Most business is conducted with the U.S. Government, primarily the Department of War.

Revenue drivers

• Ingalls Shipbuilding — Non-nuclear ship construction: it is the sole builder of Navy amphibious assault ships (LHA and LPD classes) and one of two builders of Arleigh Burke class DDG destroyers, plus Legend class National Security Cutters for the Coast Guard.
• Newport News Shipbuilding — All nuclear ship work: design, construction, overhaul, refueling and repair, tied to Gerald R. Ford class carriers and Virginia and Columbia class submarine programs.
• Mission Technologies — Services and products including C5ISR, cyber and electronic warfare, AI/ML battlefield decision tools, unmanned autonomous systems, live/virtual/constructive training, platform modernization and critical nuclear operations.
• Backlog-funded production — Work is funded through long-cycle U.S. Government contracts; new contract awards were $6.7 billion in Q2 2026, bringing total backlog to $57.3 billion as of June 30, 2026.

Recent performance

Second quarter 2026 revenues were $3.4 billion, up 10.9% from $3.082 billion in Q2 2025, driven by growth at Newport News and Ingalls. Operating income was $210 million at a 6.1% margin, versus $163 million and 5.3% a year earlier. Net earnings were $208 million, or $5.27 diluted EPS, compared with $152 million and $3.86. Net cash used in operating activities was $31 million and free cash flow was negative $150 million, versus positive operating cash flow of $823 million and free cash flow of $730 million in Q2 2025. First-half 2026 revenue was $6.517 billion, up 12.1%.

Strategy

Management is focused on execution and shipbuilding throughput, stating plans to achieve a 15% shipbuilding throughput improvement goal for 2026. The company raised its FY26 shipbuilding revenue guidance to $10.2-$10.4 billion, lifted the low end of its shipbuilding operating margin guidance and reaffirmed its free cash flow outlook. It continues to pursue multi-ship contract awards, including 2024 multi-ship procurement for LPD 33-35 and 2023 multi-year awards for seven DDG 51 destroyers.

Risks

• Government budget and appropriations timing — HII depends on U.S. defense funding, and the FY2027 budget request is still under congressional consideration with the Senate Appropriations Committee yet to conduct markups.
• Funding lapses — The 10-K risk discussion cites a historic 43-day funding lapse, and the company cannot predict whether a short-term funding measure will be needed if appropriations are not finalized by October 1.
• Supply chain and labor — The company states its customers, suppliers and subcontractors continue to face challenges and describes a challenging labor market.
• Cost and margin execution — Second-quarter free cash flow was negative $150 million versus $730 million positive a year earlier, illustrating sensitivity of cash generation to shipbuilding execution and timing.

Outlook

Management raised FY26 shipbuilding revenue guidance to between $10.2 and $10.4 billion, lifted the low end of the shipbuilding operating margin range and reaffirmed its previously issued free cash flow outlook. It expects to achieve a 15% shipbuilding throughput improvement goal for 2026. The FY2027 budget request recommends $65.8 billion for shipbuilding procurement, including one Columbia class submarine, two Virginia class submarines, one DDG 51 destroyer, one LPD 17 ship, one LHA 6 ship and the first FF(X) frigate.