Core Insights - Huntington Ingalls Industries, Inc. (HII) reported second-quarter 2025 earnings of $3.86 per share, a decline of 11.9% from $4.38 in the prior-year quarter, but exceeded the Zacks Consensus Estimate of $3.23 by 19.5% [1] Revenue Performance - Total revenues for the quarter reached $3.08 billion, surpassing the Zacks Consensus Estimate of $2.92 billion by 5.2% and showing a year-over-year increase of 3.5% from $2.98 billion, driven by higher sales volume across all major business segments [2][9] Operational Performance - Segmental operating income was reported at $172 million, down from $203 million in the second quarter of 2024, with a segmental operating margin contraction of 120 basis points to 5.6%, primarily due to poor performance across all business segments [3] Order Backlog - HII received orders worth $11.9 billion in the second quarter of 2025, resulting in a total backlog of $56.9 billion as of June 30, 2025, compared to $48 billion as of March 31, 2024 [4] Segmental Performance - Newport News Shipbuilding: Revenues totaled $1.60 billion, up 4.4% year over year, but operating income decreased by 26.1% to $82 million due to poor performance in the Virginia-class submarine program and aircraft carrier construction [5] - Ingalls Shipbuilding: Revenues reached $724 million, a 1.7% increase year over year, with operating earnings down 3.6% to $54 million due to lower performance and contract incentives from amphibious assault ships [6] - Mission Technologies: Revenues were $791 million, up 3.4% year over year, driven by higher volumes from C5ISR and training solutions [6] Financial Update - Cash and cash equivalents as of June 30, 2025, totaled $343 million, significantly down from $831 million as of December 31, 2024 [8] - Long-term debt stood at $2.70 billion, consistent with the level at the end of 2024 [10] - Free cash flow was reported at $268 million, a significant improvement from a free cash outflow of $373 million in the prior-year period [10] 2025 Guidance - HII reaffirmed its 2025 guidance, expecting shipbuilding revenues in the range of $8.9-$9.1 billion and Mission Technologies revenues between $2.9-$3.1 billion, with an updated free cash flow projection of $500-$600 million [11]

Core Viewpoint - The article compares Huntington Ingalls (HII) and RTX (RTX) to determine which stock is a better undervalued investment option in the Aerospace - Defense sector [1] Group 1: Zacks Rank and Valuation Metrics - HII has a Zacks Rank of 2 (Buy), indicating a more favorable earnings estimate revision trend compared to RTX, which has a Zacks Rank of 3 (Hold) [3] - Value investors utilize various valuation metrics to assess whether a company is undervalued, including P/E ratio, P/S ratio, earnings yield, and cash flow per share [4] Group 2: Specific Valuation Comparisons - HII's forward P/E ratio is 17.92, while RTX's forward P/E ratio is significantly higher at 26.57 [5] - HII has a PEG ratio of 1.59, indicating a more favorable valuation in relation to its expected earnings growth, compared to RTX's PEG ratio of 2.91 [5] - HII's P/B ratio stands at 2.13, while RTX has a higher P/B ratio of 3.3, further supporting HII's position as the more attractive value option [6] Group 3: Overall Value Grades - Based on the discussed metrics, HII holds a Value grade of B, while RTX has a Value grade of C, reinforcing HII's superior valuation profile [6]

[PART I – FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for the periods ended June 30, 2025 [Condensed Consolidated Statements of Operations and Comprehensive Income](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) The company reported Q2 2025 revenues of $3.08 billion and net earnings of $152 million, reflecting a slight revenue increase but a decrease in net earnings year-over-year Consolidated Statements of Operations Highlights (Unaudited) | (in millions, except per share amounts) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | **Sales and service revenues** | $3,082 | $2,977 | $5,816 | $5,782 | | **Operating income** | $163 | $189 | $324 | $343 | | **Net earnings** | $152 | $173 | $301 | $326 | | **Diluted earnings per share** | $3.86 | $4.38 | $7.66 | $8.25 | [Condensed Consolidated Statements of Financial Position](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Financial%20Position) Total assets slightly decreased to $12.10 billion as of June 30, 2025, marked by a significant drop in cash and an increase in stockholders' equity Condensed Consolidated Statements of Financial Position Highlights (Unaudited) | ($ in millions) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total current assets** | $2,973 | $3,228 | | **Total assets** | $12,098 | $12,141 | | **Total current liabilities** | $2,750 | $2,991 | | **Total liabilities** | $7,216 | $7,475 | | **Total stockholders' equity** | $4,882 | $4,666 | [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations improved significantly to $428 million for the first half of 2025, though overall cash decreased due to investing and financing activities Condensed Consolidated Statements of Cash Flows Highlights (Unaudited) | ($ in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | **Net cash provided by (used in) operating activities** | $428 | $(211) | | **Net cash used in investing activities** | $(291) | $(162) | | **Net cash used in financing activities** | $(625) | $(46) | | **Change in cash and cash equivalents** | $(488) | $(419) | | **Cash and cash equivalents, end of period** | $343 | $11 | [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes detail accounting policies, segment performance, a recent acquisition, backlog status, and significant legal proceedings - The company is organized into three reportable segments: Ingalls Shipbuilding, Newport News Shipbuilding, and Mission Technologies, making it **America's largest shipbuilder**[14](index=14&type=chunk) - In January 2025, the company acquired W International for **$133 million in cash** to expand its shipbuilding capacity, resulting in **$33 million of tax-deductible goodwill**[26](index=26&type=chunk) - As of June 30, 2025, the company had **$56.9 billion of remaining performance obligations (backlog)**, with approximately 35% expected to be recognized as revenue through 2026[34](index=34&type=chunk) - The company is involved in a class action antitrust lawsuit alleging a "gentlemen's agreement" not to recruit naval engineers from other defendants, which was remanded for further proceedings[53](index=53&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses a 4% YoY revenue increase to $3.1 billion in Q2 2025, offset by a 14% decrease in operating income due to segment performance issues - The federal government is operating under a full-year Continuing Resolution for fiscal year 2025, creating uncertainty, while the proposed FY2026 budget recommends a **$1.01 trillion National Defense budget**[78](index=78&type=chunk)[79](index=79&type=chunk) - **Total backlog increased to $56.9 billion** as of June 30, 2025, from $48.7 billion at year-end 2024, driven by **$14.0 billion in new contract awards** in the first half of 2025[149](index=149&type=chunk)[151](index=151&type=chunk) - **Free cash flow for the first six months of 2025 was $268 million**, a **$641 million improvement** from the negative $373 million in the same period of 2024[160](index=160&type=chunk) Consolidated Operating Results Summary | ($ in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (%) | | :--- | :--- | :--- | :--- | | **Sales and service revenues** | $3,082 | $2,977 | 4% | | **Operating income** | $163 | $189 | (14)% | | **Net earnings** | $152 | $173 | (12)% | [Ingalls Segment](index=29&type=section&id=Ingalls%20Segment) The Ingalls segment reported a 2% revenue increase to $724 million in Q2 2025, with a slight decrease in operating income and margin Ingalls Segment Performance (Q2 2025 vs Q2 2024) | ($ in millions) | Q2 2025 | Q2 2024 | Change (%) | | :--- | :--- | :--- | :--- | | **Sales and service revenues** | $724 | $712 | 2% | | **Segment operating income** | $54 | $56 | (4)% | | **Operating Margin** | 7.5% | 7.9% | - | [Newport News Segment](index=29&type=section&id=Newport%20News%20Segment) Newport News revenue grew 4% to $1.60 billion in Q2 2025, but operating income fell 26% due to performance challenges on key programs - The Newport News segment continues to face **performance challenges** in the construction of aircraft carriers and the Virginia class (SSN 774) submarine program[123](index=123&type=chunk) Newport News Segment Performance (Q2 2025 vs Q2 2024) | ($ in millions) | Q2 2025 | Q2 2024 | Change (%) | | :--- | :--- | :--- | :--- | | **Sales and service revenues** | $1,603 | $1,535 | 4% | | **Segment operating income** | $82 | $111 | (26)% | | **Operating Margin** | 5.1% | 7.2% | - | [Mission Technologies Segment](index=31&type=section&id=Mission%20Technologies%20Segment) The Mission Technologies segment revenue rose 3% to $791 million in Q2 2025, while operating income remained flat at $36 million Mission Technologies Segment Performance (Q2 2025 vs Q2 2024) | ($ in millions) | Q2 2025 | Q2 2024 | Change (%) | | :--- | :--- | :--- | :--- | | **Sales and service revenues** | $791 | $765 | 3% | | **Segment operating income** | $36 | $36 | 0% | | **Operating Margin** | 4.6% | 4.7% | - | [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company is exposed to market risks from inflation, while interest rate risk is currently mitigated by no outstanding floating-rate debt - The company had **no outstanding balances** on its $1.7 billion revolving credit facility or its $1.7 billion commercial paper program as of June 30, 2025, mitigating short-term floating interest rate risk[172](index=172&type=chunk) - **Persistent cost inflation** for raw materials, components, and supplies is a key risk that may not be fully covered by mitigation measures[173](index=173&type=chunk) [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls - The CEO and CFO concluded that as of June 30, 2025, the company's **disclosure controls and procedures were effective**[174](index=174&type=chunk) - **No changes occurred** in the company's internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, these controls[175](index=175&type=chunk) [PART II – OTHER INFORMATION](index=38&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to legal proceeding disclosures in Part I, Item 1, noting no other material matters and a $1 million disclosure threshold for environmental cases - Information on legal proceedings is incorporated by reference from the notes to the financial statements in Part I, Item 1[178](index=178&type=chunk) - The company's disclosure threshold for environmental legal proceedings with governmental authorities is potential monetary sanctions **over $1 million**[179](index=179&type=chunk) [Item 1A. Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) This section refers readers to the comprehensive risk factors detailed in the company's 2024 Annual Report on Form 10-K - The report refers to the risk factors detailed in the **2024 Annual Report on Form 10-K** for a comprehensive understanding of potential risks[180](index=180&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not repurchase any common stock in Q2 2025, with approximately $1.35 billion remaining under its authorized repurchase program - The board of directors authorized an increase in the stock repurchase program to **$3.8 billion** and extended its term to December 31, 2028[28](index=28&type=chunk)[182](index=182&type=chunk) Share Repurchase Activity (Quarter Ended June 30, 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Approximate Dollar Value of Shares that May Yet Be Purchased (in millions) | | :--- | :--- | :--- | :--- | | April 2025 | — | $— | $1,352.3 | | May 2025 | — | $— | $1,352.3 | | June 2025 | — | $— | $1,352.3 | | **Total** | **—** | **$—** | **$1,352.3** | [Item 5. Other Information](index=39&type=section&id=Item%205.%20Other%20Information) No company directors or officers adopted or terminated a Rule 10b5-1 trading plan during the second quarter of 2025 - **No directors or officers** adopted or terminated a Rule 10b5-1 trading plan during the quarter[185](index=185&type=chunk) [Item 6. Exhibits](index=39&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including certifications and XBRL data files - Key exhibits filed include **CEO/CFO certifications** under Sarbanes-Oxley Sections 302 and 906, and financial statements formatted in XBRL[186](index=186&type=chunk)

Core Insights - Huntington Ingalls (HII) reported revenue of $3.08 billion for the quarter ended June 2025, reflecting a 3.5% increase year-over-year and surpassing the Zacks Consensus Estimate of $2.93 billion by 5.22% [1] - The company's EPS was $3.86, down from $4.38 in the same quarter last year, but exceeded the consensus EPS estimate of $3.23 by 19.5% [1] Financial Performance Metrics - Sales and Service Revenues for Mission Technologies reached $791 million, exceeding the average estimate of $743.79 million by analysts, marking a year-over-year increase of 3.4% [4] - Intersegment eliminations reported revenues of $-36 million, slightly above the average estimate of $-35.9 million, with a year-over-year change of 2.9% [4] - Newport News generated $1.6 billion in revenues, surpassing the estimated $1.53 billion and showing a 4.4% increase compared to the previous year [4] - Ingalls reported $724 million in revenues, exceeding the average estimate of $693.91 million, reflecting a year-over-year change of 1.7% [4] Segment Operating Income - Ingalls segment operating income was $54 million, above the average estimate of $46.5 million [4] - Mission Technologies segment operating income reached $36 million, exceeding the estimated $27.66 million [4] - Newport News segment operating income was reported at $82 million, surpassing the average estimate of $79.32 million [4] Stock Performance - Shares of Huntington Ingalls have returned +3.4% over the past month, outperforming the Zacks S&P 500 composite's +2.7% change [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating potential for outperformance in the near term [3]

Financial Performance - The company reported second quarter sales of $3.1 billion, with earnings per share of $3.86 and a backlog of $56.9 billion [5][13] - Free cash flow was $730 million, with capital expenditures of $93 million [6][19] - Revenues increased by 3.5% year-over-year, driven by growth across all three divisions [13] Business Line Performance - Ingalls revenues were $724 million, up 1.7% year-over-year, primarily due to higher volume on the guided missile destroyer program [14] - Newport News revenues reached $1.6 billion, a 4.4% increase, driven by higher volumes on Columbia and Virginia class submarine programs [15] - Mission Technologies revenues were $791 million, up 3.4%, supported by a favorable resolution related to a C5ISR contract [15] Market Data - The company secured contract awards totaling $11.9 billion, including two Block V submarines and various shipbuilding investments [5][11] - The reconciliation bill and FY 2026 budget include significant support for shipbuilding programs, with $4.9 billion allocated for the shipbuilding industrial base [12] Company Strategy and Industry Competition - The company is focused on increasing throughput, achieving cost reductions, and capturing new contract awards [12][26] - A technology partnership with C3AI aims to leverage digital technologies and AI to enhance shipbuilding efficiency [8] Management Commentary on Operating Environment and Future Outlook - Management acknowledged challenges in transitioning from pre-COVID contracts to new contracts, with expectations for improved performance in the latter half of the year [9][10] - The company remains confident in achieving a 20% improvement in throughput, contingent on hiring experienced personnel and stabilizing the supply chain [32][36] Other Important Information - The company updated its 2025 free cash flow guidance to between $500 million and $600 million, reflecting improved cash tax expectations [22] - The company ended the quarter with a cash balance of $343 million and total liquidity of approximately $2 billion [20] Q&A Session Summary Question: How to reconcile the significant increase in shipbuilding throughput with the modest revenue guidance? - Management explained that the revenue forecast considers wage increases and material timing, and they remain confident in achieving their throughput targets [31][34] Question: Is the five-year cumulative free cash flow target back on the table? - Management clarified that they are focused on annual guidance and have not reinstated a five-year target at this time [41] Question: What is the expected impact of the changes in R&D tax code? - Management indicated that the changes provide a tailwind for cash flow, with an estimated increase of $150 million due to the new tax treatment [69] Question: What is the status of the unmanned undersea vehicle program? - Management noted that while the unmanned vehicle segment is currently small, they expect significant growth opportunities in the future [72] Question: How many employees were hired in the quarter? - Approximately 2,400 experienced employees were hired, with improvements in retention metrics observed [84]

Financial Performance - The company reported second quarter sales of $3.1 billion and earnings per share of $3.86, with a backlog of $56.9 billion [5][14] - Free cash flow was $730 million, with capital expenditures of $93 million [6][20] - Revenues increased by 3.5% year-over-year, driven by growth across all divisions [14] Business Line Performance - Ingalls revenues were $724 million, up 1.7% year-over-year, primarily due to higher volume on the guided missile destroyer program [15] - Newport News revenues reached $1.6 billion, a 4.4% increase, driven by higher volumes on Columbia and Virginia class submarine programs [15] - Mission Technologies revenues were $791 million, up 3.4%, supported by a favorable resolution related to a C5ISR contract [15] Market Data - The company secured contract awards totaling $11.9 billion, including two Block V submarines and investments in workforce development and technology [5][12] - The reconciliation bill and FY 2026 budget include significant support for shipbuilding programs, reflecting a strong funding environment [13] Company Strategy and Industry Competition - The company is focused on increasing throughput, achieving cost reductions, and capturing new contract awards [13][26] - A technology partnership with C3AI aims to leverage digital technologies and AI to enhance shipbuilding efficiency [8] - The industrial base is expanding with significant outsourcing, which is expected to increase shipbuilding capacity [11] Management Commentary on Operating Environment and Future Outlook - Management acknowledged challenges in transitioning from pre-COVID contracts to new contracts, but expressed confidence in achieving operational initiatives [10][12] - Positive trends in labor pipeline and retention were noted, with expectations for continued stability in the supply chain [11] - The company reiterated its revenue and operating margin guidance for the year, expecting shipbuilding revenue between $8.9 billion and $9.1 billion [21][22] Other Important Information - The company ended the quarter with a cash balance of $343 million and liquidity of approximately $2 billion [21] - A cash dividend of $1.35 per share was paid, totaling $53 million [20] Q&A Session Summary Question: How to reconcile the increase in throughput with the modest revenue guidance? - Management explained that the revenue forecast considers wage increases and improvements in outsourcing, which will contribute to throughput in the latter half of the year [31][32] Question: Is the five-year cumulative free cash flow target back on the table? - Management clarified that they are focused on annual guidance and have not reinstated the five-year target at this time [40][41] Question: What is the impact of the CVN 79 schedule slip to 2027? - Management indicated that the schedule slip was factored into guidance and there was no material financial impact [45][46] Question: How does the reconciliation funding affect the timeline and quantification? - Management stated that all programs are supported by the funding and it is included in the long-term revenue guidance [49][50] Question: What is the expected impact of changes in R&D tax code? - Management noted a positive impact from the tax changes, increasing free cash flow guidance due to the new treatment of R&D expenses [71][72] Question: What is the outlook for the unmanned undersea business? - Management expects outsized growth in the unmanned vehicle segment, with significant opportunities funded within the reconciliation bill [76][78] Question: How does the company view AUKUS and partnerships with international shipbuilders? - Management expressed strong support for AUKUS and highlighted strategic partnerships that could enhance throughput and industrial base capacity [82][85] Question: How many employees were hired in the quarter? - Management reported hiring approximately 2,400 experienced employees, with improvements in retention metrics noted [86]

Company Performance - Huntington Ingalls (HII) reported quarterly earnings of $3.86 per share, exceeding the Zacks Consensus Estimate of $3.23 per share, but down from $4.38 per share a year ago, representing an earnings surprise of +19.50% [1] - The company posted revenues of $3.08 billion for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 5.22%, compared to $2.98 billion in the same quarter last year [2] - Over the last four quarters, the company has surpassed consensus EPS estimates two times and topped consensus revenue estimates once [2] Stock Performance - Huntington Ingalls shares have increased approximately 36.8% since the beginning of the year, significantly outperforming the S&P 500's gain of 8.2% [3] - The current consensus EPS estimate for the upcoming quarter is $3.47 on revenues of $2.98 billion, and for the current fiscal year, it is $14.42 on revenues of $11.91 billion [7] Industry Outlook - The Aerospace - Defense industry, to which Huntington Ingalls belongs, is currently ranked in the top 26% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, suggesting that the industry outlook can materially impact stock performance [5][8]

Financial Performance - HII reported Q2 2025 consolidated revenue of $3082 million, a 3.5% increase compared to $2977 million in Q2 2024[19] - The company's Q2 2025 segment operating income was $172 million, a 15.3% decrease from $203 million in Q2 2024[23] - Free cash flow for Q2 2025 was $730 million, significantly higher than the negative $99 million in Q2 2024[26] - Capital expenditures in Q2 2025 were $93 million, representing 3.0% of revenues[27] Segment Performance - Newport News Shipbuilding's revenue increased by 4.4% to $1603 million in Q2 2025[19] - Ingalls Shipbuilding's revenue increased by 1.7% to $724 million in Q2 2025[19] - Mission Technologies revenue increased by 3.4% to $791 million in Q2 2025[19] Future Outlook - HII reaffirms its 2025 segment revenue and operating margin guidance[31] - The company is increasing its 2025 free cash flow guidance to between $500 million and $600 million[31] - Shipbuilding revenue for FY25 is projected to be between $8.9 billion and $9.1 billion, with an operating margin between 5.5% and 6.5%[32] - Mission Technologies revenue for FY25 is expected to be between $2.9 billion and $3.1 billion, with an operating margin between 4.0% and 4.5%[32]

```markdown [Financial Highlights](index=1&type=section&id=Financial%20Highlights) HII reported second quarter 2025 revenues of $3.1 billion, a 3.5% increase year-over-year, driven by growth across all segments, though net earnings declined to $152 million, or $3.86 per diluted share, while achieving a record backlog of $56.9 billion and reaffirming full-year 2025 financial guidance Key Financial Highlights | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | **Revenues** | $3.1 billion | $2.98 billion | +3.5% | | **Net Earnings** | $152 million | $173 million | -12.1% | | **Diluted EPS** | $3.86 | $4.38 | -11.9% | | **New Contract Awards** | $11.9 billion | N/A | N/A | | **Total Backlog** | $56.9 billion | N/A | N/A | - Entered into a strategic partnership with C3 AI to expand the use of digital technologies and apply artificial intelligence to accelerate shipbuilding throughput[3](index=3&type=chunk) - Reaffirmed its fiscal year 2025 guidance for segment revenue and operating margin[3](index=3&type=chunk) - Generated strong free cash flow of **$730 million**, a significant improvement from a negative **$99 million** in Q2 2024[5](index=5&type=chunk) [Consolidated Results of Operations](index=1&type=section&id=Consolidated%20Results%20of%20Operations) For the second quarter of 2025, consolidated revenues grew 3.5% to $3.1 billion, but operating income fell 13.8% to $163 million, with operating margin compressing by 106 basis points to 5.3%, primarily due to less favorable results at Newport News Shipbuilding, leading to a 12.1% decrease in net earnings to $152 million Consolidated Performance Summary | ($ in millions, except per share) | Q2 2025 | Q2 2024 | % Change | Six Months 2025 | Six Months 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Sales and service revenues** | $3,082 | $2,977 | 3.5% | $5,816 | $5,782 | 0.6% | | **Operating income** | $163 | $189 | (13.8)% | $324 | $343 | (5.5)% | | **Operating margin %** | 5.3% | 6.3% | (106) bps | 5.6% | 5.9% | (36) bps | | **Net earnings** | $152 | $173 | (12.1)% | $301 | $326 | (7.7)% | | **Diluted earnings per share** | $3.86 | $4.38 | (11.9)% | $7.66 | $8.25 | (7.2)% | [Segment Operating Results](index=2&type=section&id=Segment%20Operating%20Results) In Q2 2025, all three segments reported revenue growth, with Newport News Shipbuilding leading at 4.4%, followed by Mission Technologies at 3.4% and Ingalls Shipbuilding at 1.7%, though profitability varied, with Newport News experiencing a significant drop in operating margin, while Ingalls saw a smaller decline and Mission Technologies remained relatively stable [Ingalls Shipbuilding](index=2&type=section&id=Ingalls%20Shipbuilding) Ingalls Shipbuilding's Q2 revenue increased by 1.7% to $724 million, driven by higher volumes in surface combatants, while segment operating income decreased slightly to $54 million, and the operating margin contracted to 7.5% due to lower performance and the absence of a prior-year delivery incentive on amphibious assault ships Ingalls Shipbuilding Performance | ($ in millions) | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | **Revenues** | $724 | $712 | 1.7% | | **Segment operating income** | $54 | $56 | (3.6)% | | **Segment operating margin %** | 7.5% | 7.9% | (41) bps | - Revenue growth was driven by higher volumes in surface combatants, partially offset by lower volumes in amphibious assault ships[9](index=9&type=chunk) - Key milestones included the christening of guided missile destroyer Jeremiah Denton (DDG 129) and signing an MOU with HD Hyundai Heavy Industries to collaborate on accelerating ship production[11](index=11&type=chunk) [Newport News Shipbuilding](index=4&type=section&id=Newport%20News%20Shipbuilding) Newport News Shipbuilding's Q2 revenue grew 4.4% to $1.6 billion, primarily from higher volumes in the Columbia-class and Virginia-class submarine programs, yet segment operating income fell sharply by 26.1% to $82 million, and the operating margin decreased significantly to 5.1% from 7.2% a year ago, attributed to lower performance in the Virginia-class submarine and aircraft carrier construction programs Newport News Shipbuilding Performance | ($ in millions) | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | **Revenues** | $1,603 | $1,535 | 4.4% | | **Segment operating income** | $82 | $111 | (26.1)% | | **Segment operating margin %** | 5.1% | 7.2% | (212) bps | - Margin decreases were driven by lower performance in the Virginia-class submarine program and aircraft carrier construction[14](index=14&type=chunk) - Key milestones included a contract modification for two additional Block V Virginia-class submarines and the launch of the Virginia-class submarine Arkansas (SSN 800)[19](index=19&type=chunk) [Mission Technologies](index=4&type=section&id=Mission%20Technologies) Mission Technologies' Q2 revenue increased 3.4% to $791 million, due to higher volumes in C5ISR and live, virtual, and constructive training solutions, with segment operating income flat at $36 million and the operating margin slightly down at 4.6% as changes in contract mix offset the benefit of higher volumes, resulting in an EBITDA margin of 8.1% for the quarter Mission Technologies Performance | ($ in millions) | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | **Revenues** | $791 | $765 | 3.4% | | **Segment operating income** | $36 | $36 | 0.0% | | **Segment operating margin %** | 4.6% | 4.7% | (15) bps | - Key milestones included delivering initial Lionfish small uncrewed undersea vehicles (SUUVs) to the U.S. Navy and an order for over a dozen REMUS 300 SUUVs by Hitachi[20](index=20&type=chunk) - EBITDA margin was **8.1%** in Q2 2025, compared to **8.5%** in Q2 2024[19](index=19&type=chunk) [HII Financial Outlook](index=8&type=section&id=HII%20Financial%20Outlook) HII reaffirmed its full-year 2025 guidance for segment revenues and operating margins, anticipating Shipbuilding revenue between $8.9 and $9.1 billion with an operating margin of 5.5% to 6.5%, and Mission Technologies revenue projected between $2.9 and $3.1 billion, while notably increasing its FY25 free cash flow guidance to a range of $500 to $600 million FY25 Financial Outlook | FY25 Outlook | Value | | :--- | :--- | | **Shipbuilding Revenue** | $8.9B - $9.1B | | **Shipbuilding Operating Margin** | 5.5% - 6.5% | | **Mission Technologies Revenue** | $2.9B - $3.1B | | **Mission Technologies Segment Operating Margin** | 4.0% - 4.5% | | **Free Cash Flow** | $500M - $600M | - The company increased its FY25 free cash flow guidance to between **$500** and **$600 million**[25](index=25&type=chunk) [Exhibit A: Financial Statements](index=10&type=section&id=Exhibit%20A%3A%20Financial%20Statements) The financial statements detail HII's performance, with the income statement showing a year-over-year decline in net earnings for the first six months, the balance sheet indicating a stable asset base and a reduction in total liabilities leading to an increase in stockholders' equity, and the cash flow statement highlighting a significant improvement in cash from operations, driving positive free cash flow [Condensed Consolidated Statements of Operations](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the six months ended June 30, 2025, HII's revenues were $5.82 billion, a marginal increase from $5.78 billion in the prior year, while net earnings decreased to $301 million from $326 million in 2024, resulting in a diluted EPS of $7.66 compared to $8.25, and dividends declared per share increased to $1.35 for the quarter Condensed Consolidated Statements of Operations | ($ in millions, except per share) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | **Sales and service revenues** | $5,816 | $5,782 | | **Operating income** | $324 | $343 | | **Net earnings** | $301 | $326 | | **Diluted earnings per share** | $7.66 | $8.25 | | **Dividends declared per share** | $2.70 | $2.60 | [Condensed Consolidated Statements of Financial Position](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Financial%20Position) As of June 30, 2025, HII's total assets stood at $12.1 billion, nearly flat compared to year-end 2024, with total liabilities decreasing to $7.2 billion from $7.5 billion mainly due to a reduction in short-term debt, which resulted in an increase in total stockholders' equity to $4.88 billion from $4.67 billion Condensed Consolidated Statements of Financial Position | ($ in millions) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Cash and cash equivalents** | $343 | $831 | | **Total current assets** | $2,973 | $3,228 | | **Total assets** | $12,098 | $12,141 | | **Total current liabilities** | $2,750 | $2,991 | | **Total liabilities** | $7,216 | $7,475 | | **Total stockholders' equity** | $4,882 | $4,666 | [Condensed Consolidated Statements of Cash Flows](index=12&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the first six months of 2025, net cash provided by operating activities was $428 million, a significant turnaround from a $211 million use of cash in the same period of 2024, with net cash used in investing activities at $291 million and financing activities using $625 million, largely due to a $500 million repayment of long-term debt, ending the period with cash and cash equivalents of $343 million Condensed Consolidated Statements of Cash Flows | ($ in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | **Net cash provided by (used in) operating activities** | $428 | ($211) | | **Net cash used in investing activities** | ($291) | ($162) | | **Net cash used in financing activities** | ($625) | ($46) | | **Change in cash and cash equivalents** | ($488) | ($419) | | **Cash and cash equivalents, end of period** | $343 | $11 | [Exhibit B: Non-GAAP Measures Definitions & Reconciliations](index=13&type=section&id=Exhibit%20B%3A%20Non-GAAP%20Measures%20Definitions%20%26%20Reconciliations) This section defines and reconciles non-GAAP financial measures used by HII management, including Segment Operating Income, Segment Operating Margin, and Free Cash Flow, which are utilized to evaluate core operating performance by excluding certain items like the FAS/CAS adjustment and non-current state income taxes, or by adjusting for capital expenditures - Segment operating income is defined as operating income before the Operating FAS/CAS Adjustment and non-current state income taxes[34](index=34&type=chunk) - Free cash flow is defined as net cash provided by (used in) operating activities less capital expenditures net of related grant proceeds[40](index=40&type=chunk) [Reconciliation of Segment Operating Income and Segment Operating Margin](index=14&type=section&id=Reconciliation%20of%20Segment%20Operating%20Income%20and%20Segment%20Operating%20Margin) For Q2 2025, HII's GAAP operating income of $163 million was reconciled to a non-GAAP segment operating income of $172 million, primarily accounting for a $6 million Operating FAS/CAS Adjustment and $3 million in non-current state income taxes, resulting in a segment operating margin of 5.6% Segment Operating Income and Margin Reconciliation | ($ in millions) | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | **Operating Income (GAAP)** | $163 | $189 | | Operating FAS/CAS Adjustment | $6 | $15 | | Non-current state income taxes | $3 | ($1) | | **Segment Operating Income (Non-GAAP)** | $172 | $203 | [Reconciliation of Free Cash Flow](index=14&type=section&id=Reconciliation%20of%20Free%20Cash%20Flow) HII generated $730 million of free cash flow in Q2 2025, a substantial improvement from a negative $99 million in Q2 2024, calculated by taking net cash from operating activities of $823 million and subtracting net capital expenditures of $93 million Free Cash Flow Reconciliation | ($ in millions) | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | **Net cash provided by (used in) operating activities** | $823 | ($9) | | Less: Capital expenditures (net) | ($93) | ($90) | | **Free cash flow (Non-GAAP)** | $730 | ($99) | [Reconciliation of Mission Technologies EBITDA and EBITDA Margin](index=16&type=section&id=Reconciliation%20of%20Mission%20Technologies%20EBITDA%20and%20EBITDA%20Margin) For Q2 2025, Mission Technologies' segment operating income of $36 million was reconciled to an EBITDA of $64 million by adding back $3 million in depreciation, $23 million in amortization, and $2 million in state tax expense, resulting in an EBITDA margin of 8.1% Mission Technologies EBITDA Reconciliation | ($ in millions) | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | **Mission Technologies segment operating income** | $36 | $36 | | Add: Depreciation & Amortization | $26 | $27 | | Add: State tax expense | $2 | $2 | | **Mission Technologies EBITDA** | $64 | $65 | | **Mission Technologies EBITDA margin** | 8.1% | 8.5% | ```

Core Insights - HII reported second quarter 2025 revenues of $3.1 billion, a 3.5% increase from the same period in 2024, driven by growth in Newport News Shipbuilding, Mission Technologies, and Ingalls Shipbuilding [3][9] - Operating income for the second quarter was $163 million with an operating margin of 5.3%, down from $189 million and 6.3% in the same quarter of 2024 [3][5] - Net earnings decreased to $152 million, or $3.86 diluted earnings per share, compared to $173 million and $4.38 in the prior year [5][9] - New contract awards totaled $11.9 billion, resulting in a record backlog of $56.9 billion as of June 30, 2025 [6][9] Financial Performance - Segment operating income for the second quarter was $172 million with a margin of 5.6%, down from $203 million and 6.8% in the same quarter of 2024 [4][9] - Net cash provided by operating activities was $823 million, compared to a net cash used of $9 million in the second quarter of 2024 [5][49] - Free cash flow for the quarter was $730 million, a significant improvement from negative $99 million in the same period last year [5][49] Segment Analysis Ingalls Shipbuilding - Revenues increased to $724 million, up 1.7% from $712 million in the same quarter of 2024, primarily due to higher volumes in surface combatants [11][12] - Segment operating income was $54 million, a decrease from $56 million in the prior year, with a margin of 7.5% compared to 7.9% [12][11] Newport News Shipbuilding - Revenues rose to $1.6 billion, a 4.4% increase from $1.5 billion in the same quarter of 2024, driven by higher volumes in submarine programs [13][15] - Segment operating income fell to $82 million from $111 million, with a margin of 5.1% compared to 7.2% in the previous year [15][13] Mission Technologies - Revenues for the segment were $791 million, a 3.4% increase from $765 million in the same quarter of 2024 [16][17] - Segment operating income remained stable at $36 million, with a margin of 4.6%, slightly down from 4.7% [17][16] Strategic Developments - The company entered a strategic partnership with C3 AI to enhance the use of digital technologies and artificial intelligence in shipbuilding [9] - HII reaffirmed its fiscal year 2025 segment revenue and operating margin guidance, projecting shipbuilding revenue between $8.9 billion and $9.1 billion [29][21]