Huntington Ingalls reported strong top-line growth in the fourth quarter, exceeding Wall Street’s revenue and profit expectations, yet the market responded negatively. Management pointed to higher shipbuilding throughput as a primary driver, with improvements in hiring, retention, and operational efficiency. CEO Chris Kastner emphasized that increased productivity was broad-based across major programs, supported by expanded outsourcing and continuous investments in the workforce. However, concerns about margin progression and the sustainability of recent gains appeared to weigh on investor sentiment, as management acknowledged ongoing cost pressures and schedule complexities.
Is now the time to buy HII? Find out in our full research report (it’s free for active Edge members).
Huntington Ingalls (HII) Q4 CY2025 Highlights:
- Revenue: $3.48 billion vs analyst estimates of $3.08 billion (15.7% year-on-year growth, 12.7% beat)
- Adjusted EPS: $4.04 vs analyst estimates of $3.85 (5% beat)
- Adjusted EBITDA: $259 million vs analyst estimates of $259.6 million (7.5% margin, in line)
- Operating Margin: 4.9%, up from 3.7% in the same quarter last year
- Backlog: $53.14 billion at quarter end, up 9.1% year on year
- Market Capitalization: $15.41 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Huntington Ingalls’s Q4 Earnings Call
- Robert Stallard (Vertical Research): Asked about the sustainability of productivity gains and future capital expenditures. CEO Chris Kastner and CFO Tom Stiehle confirmed improvements were broad-based but signaled elevated capital spending would likely persist to support further growth.
- Doug Harned (Bernstein): Questioned margin improvement at Newport News and whether additional industrial base funding was needed. Kastner cited ongoing transition from pre- to post-pandemic contracts, with gradual margin recovery as project mix improves.
- Noah Poponak (Goldman Sachs): Pressed on flat shipbuilding margins despite increased funding and productivity. Kastner attributed margin stagnation to increased investments in overtime and outsourcing, with meaningful gains expected only as new contracts are fully integrated.
- Judd Goddin (Citigroup): Asked for clarity on margin shape throughout the year and key delivery milestones. Stiehle said margin progression would depend on timing of contract awards and milestone completions, flagging SSN 800 and LPD 30 as critical risk points.
- Mariana Perez Mora (Bank of America): Inquired about the growth and profitability potential of unmanned and autonomy solutions in Mission Technologies. Kastner highlighted strong demand and ongoing investment, but noted that higher margins depend on the evolution of commercial terms and intellectual property ownership.
Catalysts in Upcoming Quarters
In the coming quarters, our analyst team will focus on (1) the pace of contract awards for new submarine and surface ship programs, (2) progress toward targeted throughput and outsourcing milestones, and (3) signs of margin stabilization as project mix shifts to newer awards. We will also watch for further developments in Mission Technologies’ autonomy and unmanned systems offerings, as well as labor market dynamics that could impact execution.
Huntington Ingalls currently trades at $390.02, down from $413.14 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free).
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