- Company name
- Huntington Ingalls
- Sector
- Defense shipbuilding
- About
- Huntington Ingalls (HII) is the largest military shipbuilder in the US. Newport News Shipbuilding in Virginia is the only US yard that builds nuclear aircraft carriers, and it builds nuclear submarines with General Dynamics' Electric Boat. It also refuels and overhauls carriers. Ingalls Shipbuilding in Mississippi builds amphibious assault ships, destroyers and Coast Guard cutters. Mission Technologies sells unmanned systems, C6ISR, cyber, training and nuclear services, and it had $792 million of revenue in Q3 2026. The US government is almost the only customer, through long contracts that are mostly fixed-price incentive or cost-plus. HII makes money from the margin on these contracts, and the margin moves with its cost performance. Backlog was $86.2 billion at September 30, 2026, and the company has about 46,000 employees.
- Thesis
- HII trades at a discount because investors doubt that it can turn its large backlog into profit and cash. Its shipbuilding margin is low, with guidance of 6.0% to 6.5% for 2026, because labor, supply chain and inflation raise the cost of ships that it builds under long contracts. Free cash flow was negative in Q1 and Q2 2026. It was positive $429 million in Q3, but still negative $182 million for the first nine months. The full-year target of $500 million to $600 million therefore depends on Q4. Demand is strong: backlog grew to $86.2 billion at September 30, 2026, after $32.4 billion of new awards in Q3, including the next Virginia-class and Columbia-class submarine contracts. HII says that these awards secure about 90% of its expected shipbuilding revenue through 2030. Investors want proof that this demand gives better margins. In Q3, net favorable contract adjustments of $76 million, mostly on the Columbia class, lifted the shipbuilding margin above the guided range. For the gap to close, HII must reach its 15% shipbuilding throughput goal for 2026, keep the shipbuilding margin in the guided range without large unfavorable contract adjustments, reach $500 million to $600 million of free cash flow for 2026 and reach its target of $1.2 billion to $1.3 billion for 2026 and 2027 together. The full-year 2026 results and the 2027 outlook, expected in early 2027, are the main test of the cash target. Higher margins need several years of better labor productivity, so the gap probably closes slowly, over two to three years. The main risk is new cost growth on carriers or submarines.
- Risks
- Cost growth on long ship contracts lowers margins. HII records the effect of new cost estimates at once, as cumulative catch-up adjustments. In Q3 2026, gross unfavorable adjustments were $156 million. Gross favorable adjustments of $232 million, including $65 million on the Columbia class, more than offset them. In Q2 2026, an unfavorable adjustment of $48 million on the overhaul of USS George Washington (CVN 73) lowered profit.
Free cash flow was negative $461 million in Q1 2026, negative $150 million in Q2 2026 and positive $429 million in Q3 2026. For the first nine months, it was negative $182 million, so the full-year target of $500 million to $600 million needs about $680 million to $780 million in Q4. A delay in Navy payments or milestones can move cash into 2027.
Ship output depends on enough skilled workers and on suppliers. HII must reach its goal of 15% more shipbuilding throughput in 2026. A shortage of workers or late parts from suppliers slows work and raises costs.
Almost all revenue comes from the US government. Changes in Navy budgets and shipbuilding plans, a continuing resolution or a government shutdown can delay new contracts and payments.
Cash was $387 million at September 30, 2026, and only $12 million at June 30, 2026. HII depends on its operating cash flow and on its $1.7 billion credit facility and commercial paper program during the year.
- Balance sheet
- Cash: $387M
Debt: $2.7B
Net debt: $2.3B
EBITDA, last 12 months: $1.1B
Net debt / EBITDA: 2.1× (medium)
Interest cover: 8.1×
Undrawn credit line: $1.7B, to September 2029
Debt due within 12 months: $0.0M
Last debt due: 2035
Debt is unsecured senior notes plus $21 million of revenue bonds, with no amount drawn on the credit facility or the commercial paper program at September 30, 2026. HII issued and repaid no notes in the first nine months of 2026. It used commercial paper during Q3 2026, which raised interest expense, but it had repaid it by September 30. The first notes to mature are $600 million due December 2027 and $600 million due August 2028. The last notes, $500 million, are due January 2035. Cash was $387 million at September 30, 2026, up from $12 million at June 30 because free cash flow was $429 million in Q3. It was still below the $774 million of December 31, 2025, because free cash flow was negative $182 million for the first nine months. The $1.7 billion revolving credit facility, which also backs the $1.7 billion commercial paper program, runs to September 2029. EBITDA is operating income plus depreciation and amortization for the 12 months to September 2026. Interest cover is for the first nine months of 2026. At September 30, 2026, the balance sheet showed $1.67 billion of pension plan assets and $155 million of pension plan liabilities. HII bought back no shares in the first nine months of 2026.
As of Sep 30, 2026.
- Checkpoints
- Oct 29, 2026: Q3 2026 results: free cash flow and shipbuilding margin. Passed. Watch: Positive free cash flow, a shipbuilding margin of 6.0% to 6.5% and the full-year free cash flow target kept pass; another quarter of negative cash flow or a cut to the target fails. Outcome: Free cash flow was positive $429 million, the shipbuilding margin was about 6.9%, and HII kept its 2026 free cash flow target of $500 million to $600 million.
Jan 29, 2027 (estimate): Full-year 2026 results and 2027 outlook. Pending. Watch: Free cash flow of $500 million to $600 million for 2026, a 2027 outlook in line with the $1.2 billion to $1.3 billion two-year cash target and a higher shipbuilding margin pass; a cash shortfall or lower margin guidance fails.
May 2027 (estimate): Q1 2027 results: throughput and contract adjustments. Pending. Watch: Higher shipbuilding output with few unfavorable contract adjustments passes; new cost growth on carriers or submarines fails.
- Recent events
- Oct 29, 2026: HII reported Q3 2026 results. Revenue was $3.54 billion, up 10.8%. The operating margin rose to 7.0% from 5.0%, and diluted EPS was $5.48, up from $3.68. Free cash flow was positive $429 million, after two negative quarters. Net favorable contract adjustments were $76 million, including a favorable adjustment of $65 million on the Columbia class. New awards were $32.4 billion, and backlog was $86.2 billion.
Oct 29, 2026: HII raised its 2026 shipbuilding revenue guidance to $10.5 billion to $10.7 billion and kept the shipbuilding margin guidance of 6.0% to 6.5%. It kept its 2026 free cash flow target of $500 million to $600 million, and it set a new target of $1.2 billion to $1.3 billion of free cash flow for 2026 and 2027 together. The CEO said that the Q3 awards secure about 90% of the expected shipbuilding revenue through 2030.
Oct 19, 2026: The board elected Mike Petters, HII's CEO from 2011 to 2022, as a director. The board grew to twelve members.
Oct 13, 2026: The stock set a new 52-week low. Investing.com reported that it fell 32% over the six months before.
Oct 8, 2026: HII said that it will report Q3 2026 results on October 29, 2026, with a conference call at 9 a.m. Eastern time.
Sep 29, 2026: The Navy awarded Newport News Shipbuilding a $5.10 billion contract for the refueling and complex overhaul of the aircraft carrier USS Harry S. Truman (CVN 75). With options, the value can reach about $5.18 billion.
Jul 30, 2026: HII reported Q2 2026 results. Revenue was $3.42 billion, up 10.9%. Diluted EPS was $5.27, up from $3.86. Free cash flow was negative $150 million. HII raised its 2026 shipbuilding revenue guidance to $10.2 billion to $10.4 billion and raised the low end of the shipbuilding margin guidance to 6.0%. It kept its free cash flow target of $500 million to $600 million. Q2 results included an unfavorable adjustment of $48 million on the overhaul of USS George Washington.
Jul 29, 2026: The Navy awarded contracts worth about $76.6 billion, including $5 billion awarded earlier for shipyard improvements, for nine Block VI Virginia-class and five Build II Columbia-class submarines. Electric Boat is the prime contractor, and HII is the main partner. Newport News is the delivery yard for six of the Virginia-class boats, and the work runs to July 2038.
May 5, 2026: HII reported Q1 2026 results. Revenue was $3.1 billion, up 13.4%, but the operating margin fell to 5.0% from 5.9%. Free cash flow was negative $461 million. HII kept its 2026 guidance. Workers at Ingalls ratified new labor agreements that run through 2031, and the carrier John F. Kennedy (CVN 79) completed builder's sea trials. The stock fell on the day of the report.