Huntington Ingalls Shares Plummet 17% on Disappointing Q4 Results

Huntington Ingalls Industries (HII) shares took a significant hit on Thursday, February 7, 2025, as the company reported fourth-quarter earnings that missed analysts' estimates. The stock price fell by 17.5% to $163.23 at the close of trading, following the release of the company's financial results.

The defense contractor earned $3.15 per share in the quarter on sales of $3.00 billion, falling short of Wall Street's $3.38 per share on $3.06 billion expectations. The weak top line was driven by lower volume in all segments, with Ingalls Shipbuilding, Newport News Shipbuilding, and Mission Technologies reporting revenue declines of 8.0%, 4.6%, and 4.3% year-over-year, respectively.

Operating income decreased 64.7% year-over-year to $110 million, and the margin contracted by 616 basis points (bps) to 3.7%. Segment operating income was $103 million (-68.8% Y/Y), and the margin was 3.4%, down 696 bps Y/Y. EPS of $3.15, down 54.3% Y/Y, missed the consensus of $3.31.

Operating cash flow plunged to $393 million in 2024 and free cash flow to $40 million, compared to $970 million and $692 million, respectively, in 2023. New contract awards for 2024 were $12.1 billion, with a total backlog of around $48.7 billion as of December 31, 2024.

Chris Kastner, president and CEO of HII, stated, "We continue to make progress on ships put under contract pre-COVID, and are working diligently with our customers to put over $50 billion of new work under contract. Mission Technologies continued its strong track record of top line growth and margin expansion and secured an impressive $12 billion in total future contract value during 2024."

For the full year 2025, HII expects sales of around $11.80 billion - $12.20 billion, with expected Shipbuilding revenue of $8.9 billion - $9.1 billion and the corresponding operating margin of 5.5% - 6.5%. Mission Technologies' revenue is expected to be $2.9 billion - $3.1 billion, with an operating margin of 4.0% - 4.5% and EBITDA margin of 8.0% - 8.5%. The company expects FY25 free cash flow of $300 million - $500 million.

Investors can gain exposure to the stock via The Advisors' Inner Circle Fund III Strategas Global Policy Opportunities ETF (NYSE:SAGP).

In conclusion, Huntington Ingalls Industries' shares fell 17% on Thursday following the release of its fourth-quarter earnings, which missed analysts' estimates. The company's revenue and earnings were negatively impacted by lower volume in all segments, supply chain disruptions, and higher-than-expected costs. HII's long-term growth prospects may be affected by these challenges, but the company remains committed to delivering the world's most powerful ships and all-domain solutions. Investors should closely monitor HII's progress and consider the company's strategic initiatives to address these challenges and improve its financial performance.