Huntington Ingalls Raises Guidance as Shipbuilding Momentum Accelerates

Date of Call: Feb 5, 2026

Financials Results

• Revenue: $12.5B for FY2025, up 8.2% YOY; Q4 revenue $3.5B, up 16% QOQ
• EPS: $15.39 per diluted share for FY2025, up from $13.96 prior year; Q4 EPS $4.04, up from $3.15 prior year
• Gross Margin: Not explicitly provided; shipbuilding margin 5.9% for FY2025, a 70 bps improvement over prior year
• Operating Margin: Segment operating margin 5.7% for FY2025, up from 5.0% prior year; Q4 segment operating margin 5.6%, up from 3.4% prior year

Guidance:

• Shipbuilding revenue growth guidance raised to ~6% medium-term CAGR from ~4%.
• 2026 shipbuilding revenue outlook: $9.7B to $9.9B.
• 2026 shipbuilding operating margin: 5.5% to 6.5%.
• 2026 Mission Technologies revenue: $3.0B to $3.2B; margin ~5%.
• 2026 free cash flow: $500M to $600M.
• 2026 Q1 shipbuilding revenue ~$2.3B; operating margin near 5.5%.
• 2026 Q1 Mission Technologies revenue $700M to $750M; operating margin up 4% to 4.5%.
• Expect several shipbuilding contract awards in 2026, including Virginia-class Block 6, Columbia Build 2, CVN 75, RCOH, and CVN 82 long-lead material.

Business Commentary:

Shipbuilding Throughput and Productivity:

• Huntington Ingalls Industries reported an 8.2% increase in revenue for 2025, reaching $12.5 billion, driven by a 14% year-over-year increase in shipbuilding throughput.
• This improvement was due to increased hiring, better retention, and workforce proficiency levels.

Division Revenue Highlights:

• The Mission Technologies division achieved record revenues exceeding $3 billion for the first time in 2025.
• Growth was supported by key milestones in defense technology offerings such as the development of the U.S. Army's high-energy laser weapon system and the delivery of unmanned underwater vehicles.

Shipbuilding Milestones and Future Deliveries:

• In 2025, Ingalls delivered significant vessels, including the second Flight III destroyer and multiple amphibious ships, while Newport News delivered and launched several submarines and made progress on aircraft carriers.
• The company expects to deliver two more ships in 2026, with an additional focus on increasing throughput and outsourcing by 30%.

Capital Investment and Infrastructure:

• The company plans to invest hundreds of millions of dollars in shipyard infrastructure in 2026, focusing on facilities at Newport News to support higher submarine throughput and carrier operations.
• This investment aims to enhance capacity and throughput to meet increasing demand and support long-term growth objectives.

Guidance and Financial Outlook:

• The company raised its medium-term shipbuilding revenue growth guidance from approximately 4% to 6%, with 2026 shipbuilding revenues expected between $9.7 billion and $9.9 billion.
• This adjustment reflects progress in execution, investments in shipbuilding, and strong demand for products and services.

Sentiment Analysis:

Overall Tone: Positive

• CEO stated, 'The solid results we posted this morning are the outcome of a measurable increase in shipbuilding throughput, a key indicator for scheduled performance.' Also noted, 'We are raising our medium-term shipbuilding revenue growth guidance from approximately 4% to approximately 6%.' CFO highlighted 'good momentum' exiting 2025 and expected continued improvement in throughput and margins.

Q&A:

• Question from Robert Stallard (Vertical Research Partners): Chris, I'd like to follow up on those productivity numbers that you gave, the 14% progress in 2025. I was wondering if the performance there was the same across the various shipbuilding programs and then how much more is needed, for example, on the Virginia-class, if you're going to get consistently to 2 a year?
  Response: Productivity improvement was broad-based across programs; Virginia-class did well but requires incremental throughput to reach 2 per year target.

• Question from Robert Stallard (Vertical Research Partners): You mentioned that there's a step-up in CapEx this year. How do you expect the long-term CapEx to progress from here? Do you expect it to remain around 4% of sales going forward?
  Response: CapEx is expected to remain elevated due to investment opportunities; guidance beyond 2026 not provided, but likely consistent with current levels.

• Question from Douglas Harned (Bernstein Institutional Services): So you saw really good revenue growth in Q4 in both yards. In Newport News, though, your margins are still pretty low. Tom, you mentioned the 2 negative EACs on the CVN program. But when you look across the programs at Newport News, my assumption is you're working hard to get those margins higher. How do you see each of the programs in terms of their ability to improve and get to the goals that you're really looking for longer term?
  Response: Newport News margins impacted by pre-COVID ships and contract types; improvement expected as portfolio shifts to post-COVID ships and new contracts with incentives are awarded.

• Question from Douglas Harned (Bernstein Institutional Services): When you look at -- you've got a lot of money for the industrial base of those last 2 Block V boats. And as you commented, the '26 budget has really in a big support for shipbuilding. One of the things that we found challenging is the money can be there, but it's getting it through the throughput that you're talking about. Right now, you've probably seen a lot of the commentary about a pretty significant addition to the 2027 budget potentially, which could include money for the industrial base. When you look at it from a shipbuilding standpoint, do you need more? Or are you in already a good position given the large amount of funding that's come in? And is that enabling you to get where you need to be with respect to the -- to your industrial base?
  Response: Additional capital is needed; partnerships with Navy and expansion of distributed shipbuilding will help increase throughput.

• Question from Scott Mikus (Melius Research): Ingalls and Newport News, both exited '25 with a lot of top line momentum. You did note that the fourth quarter had some pull forward. But the first quarter guide, if my math is right, calls for shipbuilding sales to be up 13% year-over-year. But then that implies that shipbuilding sales are down 1% for the remaining 3 quarters. Is that just a function of tougher comps because it seems like you have a healthy amount of opportunity based on the milestones laid out in the slides.
  Response: Guidance is conservative; top-line momentum expected to continue with support from backlog, awards, and outsourcing.

• Question from Scott Mikus (Melius Research): On the new battle ships, is there a possibility that a Japanese or Korean shipyard could fund some of the CapEx to fulfill their obligations under the recent trade deals, and then you contribute the workforce and the design sort of in a joint venture-type format? That way, it would be an attractive investment for Huntington from a return on invested capital standpoint.
  Response: Possibly, foreign investment in industrial base could bring capacity, but specifics on battleship funding not yet determined.

• Question from Noah Poponak (Goldman Sachs): So I guess, if I kind of zoom out and look at the shipbuilding margin, it's kind of flattish through 2025. I mean it's actually down sequentially a little bit through '25, '26 guidance kind of flattish versus '25. Recognizing it's a long-cycle business and manufacturing process and these things take time. I guess just with the incremental funding, the throughput achievements, the labor achievements, Tom, you just reiterated better mix of contracts by '27. Help us better understand how the shipbuilding margins are flat for that full 2-year window? Do they snap in '27 when the mix flips to more post-COVID? And to what extent is the weighting on the next batch of nuclear subcontracts pretty binary in this discussion because you have to book so much long lead at a low margin before you get that?
  Response: Margin guidance is conservative and consistent with prior expectations; improvement expected annually as old contracts work off and new awards with incentives come in.

• Question from Noah Poponak (Goldman Sachs): When you provided the shipbuilding medium-term revenue growth target, the 6%, you have the sub bullet point there that has additional upside from recently announced programs. Can you talk a little bit more about that? I mean how much upside? And specifically on the SSC win, when does that start ramping up for you?
  Response: Frigate program (SSC) expected to ramp in 2027; battleship program will start with modest revenue in 2026 and ramp thereafter.

• Question from Peter Skibitski (Alembic Global Advisors): Chris, could you talk more about the supply chain? Chris, can you talk more about supply chain at Newport News? I think you touched on it in your remarks. I didn't hear all of it. Did you receive all the equipment from the supply chain that you expected in the fourth quarter on CVN 80? Or was it later than expected? Is that what drove the negative EACs? And kind of where are you right now in that program? And just want to get a better sense of that.
  Response: All engine room material received for CVN 80; ship is 50% erected; working on getting back on schedule with overtime.

• Question from Peter Skibitski (Alembic Global Advisors): And then just, Chris, between reconciliation and the '26 Appropriations Bill that's law now, did you get all of your priorities through in the budget this past year that you wanted? Just wondering if there's anything that didn't get into those bills that is going to be a priority for you in fiscal '27?
  Response: All programs are supported; focus is on execution.

• Question from Seth Seifman (JPMorgan Chase): I wanted to follow up quickly on the frigate. I think you talked about that being a driver of potentially of growth in 2027. I mean, given the target of having a boat in the water in 2028, should we think about that ramping up rather quickly? And is there anything you could say about the magnitude of the lift there at Ingalls and what it will do to the mix as well, given that the -- I think the NSC was a very profitable ship for that yard?
  Response: Too early to detail; frigate will be a sales upside driver in 2027 onwards, with profit target aligned to 9-10% margin.

• Question from Seth Seifman (JPMorgan Chase): Okay. And should we think about that being -- mix-wise being NSC like?
  Response: Not necessarily; blended rate target is 9-10% margin.

• Question from Seth Seifman (JPMorgan Chase): Okay. And then just to follow up, given where you ended the year with the cash balance, and what you're forecasting for '26 to have a decent amount of excess cash on the balance sheet. But by year-end, I know there's understandably a certain amount of reticence about repurchases at this point. But with good performance, does that become more of an option? Or are there other things you would think about doing with it? Or do we just kind of maybe sit with some excess cash for a little while?
  Response: Focus is on investing in shipyards for top and bottom-line growth; cash can be lumpy in shipbuilding.

• Question from John Godyn (Citigroup): I wanted to just revisit shipbuilding margins one more time. There was a lot of good detail. I think you made clear that there is some conservatism in the outlook. What I'm interested in is in the first quarter, you have shipbuilding margins kind of at the low end of the full year guidance. It suggests that the conservatism is more of a back half event as it plays out. Is that right? Or is that not? Can you help us just think about the shape of margins throughout the year? And is that conservatism something in the back half? Or might we just see a stronger start to the year than expected as you suggested?
  Response: Annual margin guidance is 5.5% to 6.5%; Q4 exit rate was 5.5%, so conservatism is factored in; updates will be provided in May.

• Question from John Godyn (Citigroup): I guess my question is, is it even possible that we start the year at the higher end at 6.5% that we fast forward a quarter or 2 when we realize that we delivered numbers like that or in terms of the art of the possible, that's not even on the table?
  Response: Range is for the entire year; focus on quarterly guidance.

• Question from John Godyn (Citigroup): Okay. Fair enough. And then if we just double click on the milestones and the time line. As you guys know, with deliveries, with the milestones, there's an intense focus on different milestones as we get closer to the dates. Are there any milestones or delivery dates that you would just flag for us right now to kind of bracket and sensitize a little, one that might be pushed a little bit more than others, just so that we can have that conversation now instead of on the eve of expecting some sort of delivery or milestone event. Any risk around anything that you would just kind of take the opportunity to bound for us?
  Response: Critical milestones are delivery of LPD 30 and SSN 800 towards end of 2026.

• Question from Scott Deuschle (Deutsche Bank): Tom, do you expect the company to make money on CVN 80 and 81 given this trend of negative EACs?
  Response: Yes, carriers are expected to be profitable; negative EACs due to upfront schedule/cost inefficiencies.

• Question from Scott Deuschle (Deutsche Bank): Okay. And then, Chris, there are a lot of data centers under construction in the state of Virginia. It looks like within an hour or 2 drive from Newport News. Are you seeing that have any kind of impact on the labor situation at Newport News, particularly for trades like electricians or pipe fitters?
  Response: No impact seen yet; hiring remains strong with support from workforce development.

• Question from Myles Walton (Wolfe Research): Tom, I was wondering -- I'm wondering if you can give us a little bit more color on the improvement in attrition because I'm trying to put the math together. You hired 6,600 shipbuilders. I think you've got another 500 employees from W International's acquisition, but I also think that you finished headcount flat versus the start of the year. So walk me through what your definition of improvement in attrition is? Did you end up with the headcount you expected? And then do you expect headcount to grow in '26?
  Response: Attrition improved 15-18% year-over-year; headcount ended where expected; focus remains on distributed shipbuilding.

• Question from Myles Walton (Wolfe Research): Okay. And then one quick one on Mission Technologies. I think you're benefiting by another $20 million runoff in amortization, which should imply an 80 basis point step down in EBITDA margins, basically very little growth in EBIT despite the $20 million runoff. Is that right? And if so, what's driving the year-on-year profile for Mission Technologies profit?
  Response: Amortization runoff provides ~$10M improvement; EBIT growth also driven by contract performance and fee write-ups.

• Question from Gautam Khanna (TD Cowen): Good morning, guys. Wanted to ask on Ingalls. I know there was -- and maybe you addressed it and I missed it, but the union contract, did you guys push the wage increases through in Q4? And was that part of the revenue upside at shipbuilding broadly in the quarter?
  Response: No wage increases pushed through at Ingalls in Q4; expected to be resolved in Q1.

• Question from Gautam Khanna (TD Cowen): No. And what's sort of the timing on that?
  Response: Union contract expected to be finalized in Q1.

• Question from Gautam Khanna (TD Cowen): Got you. And just on the VCS Block VI and the Columbia-class contract, what is your best sense on timing of when that might get awarded formally?
  Response: Awards needed before end of H1 2026 to maintain schedules; negotiations ongoing with Navy and Electric Boat.

• Question from Gautam Khanna (TD Cowen): And I would just love to get your perspective, if you're willing to share them, on how -- like this thing was expected at one point to be done over a year ago than we were thinking year-end 2025. Is there any long poles in the tent? Or is this just sort of T's and C's, minor stuff that needs to get hashed out? Or is there a big -- I'm just curious if you can give us any sort of update just because we've been talking about it for north of a year.
  Response: Contract is complex with three parties; teams work well together but process takes time.

• Question from Mariana Perez Mora (BofA Securities): So my question is going to be about Mission Technologies. How should we think about the share of the mix towards like unmanned solutions, autonomy and those things in that portfolio? Because I would imagine those are growing double digits. And I'm wondering when we should start to see that reflected in the growth for that segment.
  Response: Unmanned systems (undersea and surface) are performing well and align with Navy's hybrid fleet strategy; growth is positive but not broken out specifically.

• Question from Mariana Perez Mora (BofA Securities): And then when you think about those opportunities, right, and an administration that is leaning into what we're going to call like commercial terms, how do you think about like investing your own dollars, owning that IP and actually getting, I don't know, out of these like mid-single digit, like cost-plus type of like margins for that segment, I don't know, 5, 10 years from now? Is that a possibility? How do you think about like investments from that end?
  Response: Potential for higher profitability in unmanned and software integration; IP is open source to foster industry growth.

Contradiction Point 1

Submarine Contract Negotiations and Award Timing

Contradiction on whether contract awards are expected in Q4 versus being delayed.

How does the Trump administration's reported proposal for Hanwha to build nuclear submarines in Philadelphia affect strategic outlook? - Ronald Epstein (BofA Securities, Research Division)

2025Q4: The company is not getting distracted by such news. The focus remains on building what the Navy asks for. HII will partner with the Navy and help as needed. - Christopher Kastner(CEO)

Is the government shutdown delaying Virginia Block VI and Columbia Build II negotiations due to furloughs, and should the negotiations be split into smaller increments instead of awarding all ten submarines at once? - Scott Mikus (Melius Research LLC)

2025Q3: Negotiations are not impacted by furloughs; the team is working hard to finalize agreements before the end of the year. - Christopher Kastner(CEO)

Contradiction Point 2

Status of Throughput Improvement Targets

Contradiction on whether the 15% throughput target has been achieved or is still a future goal.

How does the Trump administration's proposal for Hanwha to build nuclear submarines in Philadelphia affect the company's strategic plans? - Ronald Epstein (BofA Securities, Research Division)

2025Q4: The company is not getting distracted by such news. The focus remains on building what the Navy asks for. HII will partner with the Navy and help as needed. - Christopher Kastner(CEO)

Is the 15% throughput improvement target the same for both Ingalls and Newport News, and did the improvement distribute equally between the two yards? - Scott Deuschle (Deutsche Bank AG, Research Division)

2025Q3: The throughput targets ended up being similar for both yards and were driven by a combination of increased outsourcing and labor performance. - Christopher Kastner(CEO)

Contradiction Point 3

Timeline for Realizing Throughput and Revenue Growth Benefits

Contradiction on when significant revenue growth from operational improvements will be realized.

Were the Newport News wage increases factored into productivity assumptions for existing contracts? - Seth Michael Seifman (JPMorgan Chase & Co, Research Division)

2025Q4: We have quickly repositioned from Block V to Block VI and Columbia Build II negotiations. Contracts could be awarded in Q4, and the process is incremental... 2025 is a bit of a binary year. - Christopher D. Kastner(CEO), Thomas E. Stiehle(CFO)

How do you reconcile the 20% higher throughput this year with only a 3% increase in shipbuilding revenue guidance? - Douglas Stuart Harned (Sanford C. Bernstein & Co., LLC., Research Division)

2025Q2: Throughput improvements are expected in the back half of the year. While there is potential upside if all commitments are met, the current guidance is considered appropriate, and a 4% long-term revenue growth rate remains comfortable. - Christopher D. Kastner(CEO)

Contradiction Point 4

Financial Impact and Timeline for Block VI and Build II Awards

Contradiction on the financial significance and timing impact of expected major contract awards.

Were the Newport News wage increases factored into productivity assumptions for existing contracts? - Seth Michael Seifman (JPMorgan Chase & Co, Research Division)

2025Q4: The timing of these awards has been factored into the guidance ranges for revenue, margin, and cash flow. They would not significantly impact current EACs or profitability. - Thomas E. Stiehle(CFO)

Can you provide more details on the timing of the contracts based on the Q3 margin forecast? - Seth Michael Seifman (JPMorgan Chase & Co, Research Division)

2025Q2: The company has quickly repositioned from Block V to Block VI and Columbia Build II negotiations. Contracts could be awarded in Q4, and the process is incremental. While awards are expected this year, there is a potential upside if they are secured or a minor downside if they slip to 2026. - Christopher D. Kastner(CEO)

Contradiction Point 5

Timeline for Ingalls Margin Turnaround

Specific timeframe for margin improvement not provided in 2025Q4 vs. 2025Q1.

Does the $50B backlog and $50B in new awards create upward pressure on the 4% shipbuilding revenue growth guidance, and when might Ingalls margins return to positive EAC adjustments? - Pete Skibitski (Alembic Global)

2025Q4: The company is focused on positive EAC adjustments across the portfolio. ... It's a matter of getting the production flow running as efficiently as possible; the timeframe for a turnaround is not yet specified. - Tom Stiehle(CFO)

How does the cost-type structure of the new "two-boat" contract differ from prior fixed-price Virginia-class contracts, and why were Q1 shipbuilding margins better than guided but forecast to decline in Q2? - David Strauss (Barclays)

2025Q1: The Q2 guidance (low end of range) is conservative, reflecting ongoing risks and variable timing of incentives... Ingalls had a strong quarter but faces normal program pressures. - Tom Stiehle(CFO)