Core Insights - Huntington Ingalls (HII) reported quarterly earnings of $3.68 per share, exceeding the Zacks Consensus Estimate of $3.29 per share, and up from $2.56 per share a year ago, representing an earnings surprise of +11.85% [1] - The company achieved revenues of $3.19 billion for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 8.44%, compared to $2.75 billion in the same quarter last year [2] - The stock has increased approximately 57.9% year-to-date, significantly outperforming the S&P 500's gain of 17.2% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $3.82 on revenues of $3.19 billion, while for the current fiscal year, the estimate is $14.75 on revenues of $11.96 billion [7] - The estimate revisions trend for Huntington Ingalls was mixed prior to the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - The Aerospace - Defense industry, to which Huntington Ingalls belongs, is currently ranked in the bottom 33% of over 250 Zacks industries, suggesting potential challenges ahead [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact investor sentiment [5]

Cautionary Statement Regarding Forward-looking Statements Q3 2025 Earnings Call Statements in this presentation and in our other filings with the SEC, as well as other statements we may make from time to time, other than statements of historical fact, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by words such as "may," "will," "should," "expects," "intends," "plans," "anticipates ...

Core Insights - Diamond Hill Capital's "Select Fund" underperformed the Russell 3000 Index in Q3 2025, returning 4.98% compared to the index's 8% gain [1] - The fund highlighted Huntington Ingalls Industries, Inc. (NYSE:HII) as a key investment, noting its strong performance and potential in the defense sector [2][3] Company Performance - Huntington Ingalls Industries, Inc. (NYSE:HII) achieved a one-month return of 4.34% and a 52-week gain of 19.13%, closing at $298.42 per share with a market capitalization of $11.71 billion on October 29, 2025 [2] - The company is recognized as a top contributor to the fund's performance in Q3, with improvements in employee attrition and strong demand anticipated from the US Department of Defense [3] Market Position and Outlook - Huntington Ingalls is well-positioned to meet the Department of Defense's needs, particularly in light of potential conflicts in the Pacific, which is expected to drive demand for the next five-plus years [3] - Despite its potential, Huntington Ingalls is not among the top 30 most popular stocks among hedge funds, with 36 hedge fund portfolios holding its stock at the end of Q2 2025, an increase from 33 in the previous quarter [4]

Core Insights - HII reported third quarter 2025 revenues of $3.2 billion, a 16.1% increase from the same period in 2024, driven by growth in Newport News Shipbuilding, Ingalls Shipbuilding, and Mission Technologies [2][4] - Operating income for the third quarter was $161 million with an operating margin of 5.0%, compared to $82 million and 3.0% in the same quarter of 2024 [2][4] - Net earnings for the quarter were $145 million, up from $101 million in the third quarter of 2024, resulting in diluted earnings per share of $3.68, compared to $2.56 in the prior year [4][7] Financial Performance - Segment operating income for the third quarter was $179 million with a segment operating margin of 5.6%, compared to $97 million and 3.5% in the same quarter of 2024 [3][6] - New contract awards in the third quarter totaled $2.0 billion, increasing the total backlog to $55.7 billion as of September 30, 2025 [5][17] - Free cash flow for the quarter was $16 million, down from $136 million in the third quarter of 2024 [4][42] Segment Analysis Ingalls Shipbuilding - Revenues for Ingalls Shipbuilding in the third quarter were $828 million, a 24.7% increase from $664 million in the same period of 2024, primarily due to higher volumes in surface combatants [8][9] - Segment operating income was $65 million, up from $49 million, with a segment operating margin of 7.9% compared to 7.4% in the previous year [9] Newport News Shipbuilding - Newport News Shipbuilding reported revenues of $1.6 billion, a 14.5% increase from $1.4 billion in the same quarter of 2024, driven by higher volumes in submarines and aircraft carriers [10][11] - Segment operating income increased to $80 million from $15 million, with a segment operating margin of 4.9% compared to 1.1% in the prior year [11] Mission Technologies - Mission Technologies generated revenues of $787 million, an 11.0% increase from $709 million in the same quarter of 2024, attributed to higher volumes in various technology solutions [12][13] - Segment operating income was $34 million, slightly up from $33 million, with a segment operating margin of 4.3%, down from 4.7% in the previous year [13] Operational Highlights - The company completed builder's sea trials for the guided missile destroyer Ted Stevens (DDG 128) and initial sea trials of the Virginia-Class Submarine Massachusetts (SSN 798) [7][9][11] - HII achieved a book-to-bill ratio of 1.25x in the third quarter [17] Financial Outlook - The company updated its fiscal year 2025 outlook, projecting shipbuilding revenue between $9.0 billion and $9.1 billion, with an operating margin of 5.5% to 6.5% [16][17] - Mission Technologies revenue is expected to be between $3.0 billion and $3.1 billion, with a segment operating margin of approximately 4.5% [17]

Financial Performance - Third quarter revenues reached a record $3.2 billion, up 16.1% from $2.749 billion in the same quarter of 2024[3] - Net earnings for the third quarter were $145 million, or $3.68 diluted earnings per share, compared to $101 million and $2.56 per share in the third quarter of 2024, representing a 43.6% increase[5] - Operating income in the third quarter was $161 million with an operating margin of 5.0%, compared to $82 million and 3.0% in the same quarter of 2024[4] - For the three months ended September 30, 2025, product sales were $2.072 billion, an increase from $1.761 billion in the same period of 2024[26] - Service revenues for the nine months ended September 30, 2025, reached $3.266 billion, compared to $3.057 billion in 2024[26] - Operating income for the three months ended September 30, 2025, was $161 million, up from $82 million in the same period of 2024[26] - Net earnings for the nine months ended September 30, 2025, were $446 million, compared to $427 million in 2024[26] - Total revenues for the nine months ended September 30, 2025, reached $9,008 million, compared to $8,531 million in 2024, reflecting a year-over-year growth of 5.6%[40] - Net earnings for the nine months ended September 30, 2025, increased to $446 million, up from $427 million in the same period of 2024, representing a growth of 4.4%[28] Revenue Breakdown - Ingalls Shipbuilding revenues increased by 24.7% to $828 million, driven by higher volumes in surface combatants[9] - Newport News Shipbuilding revenues rose 14.5% to $1.617 billion, primarily due to increased volumes in submarines and aircraft carriers[13] - Mission Technologies revenues grew by 11.0% to $787 million, attributed to higher volumes in C5ISR and cyber solutions[14] - The Mission Technologies segment reported revenues of $2,313 million for the nine months ended September 30, 2025, up from $2,224 million in 2024, marking a growth of 4.0%[42] Backlog and Contracts - New contract awards in the third quarter totaled $2.0 billion, increasing the total backlog to $55.7 billion as of September 30, 2025[6] - The company achieved a book-to-bill ratio of 1.25x in the third quarter[17] Financial Outlook - The financial outlook for shipbuilding revenue is projected between $9.0 billion and $9.1 billion for fiscal year 2025[19] - FY25 shipbuilding revenue is projected to be between $9.0 billion and $9.1 billion, with an expected operating margin of 5.5% to 6.5%[22] - FY25 Mission Technologies revenue is expected to be between $3.0 billion and $3.1 billion, with an operating margin of approximately 4.5% and an EBITDA margin between 8.0% and 8.5%[22] - The guidance for FY25 free cash flow has been increased to between $550 million and $650 million, with a cumulative target of $1.2 billion for FY25 and FY26[22] Cash Flow and Capital Expenditures - Operating cash flow for the nine months ended September 30, 2025, was $546 million, a significant increase from just $2 million in the same period of 2024[28] - Free cash flow for the nine months ended September 30, 2025, was $284 million, a significant recovery from a negative $237 million in the same period of 2024[41] - Capital expenditures for the nine months ended September 30, 2025, totaled $268 million, compared to $253 million in 2024, indicating an increase of 5.9%[28] Debt and Assets - Total assets as of September 30, 2025, were $12.309 billion, compared to $12.141 billion as of December 31, 2024[27] - Total liabilities decreased to $7.325 billion as of September 30, 2025, from $7.475 billion as of December 31, 2024[27] - The company repaid $500 million in long-term debt during the nine months ended September 30, 2025, compared to $229 million in the same period of 2024[28] - Cash and cash equivalents at the end of the period were $312 million, a decrease from $430 million at the beginning of the period[28] Technological Advancements - The company unveiled the AI-enabled ROMULUS family of unmanned surface vessels, enhancing its technological capabilities[17]

Core Insights - Zacks Premium provides tools for investors to enhance their stock market engagement and confidence, including daily updates, research reports, and stock screens [1][2] Zacks Style Scores - Zacks Style Scores are indicators that assist investors in selecting stocks likely to outperform the market within 30 days, rated from A to F based on value, growth, and momentum characteristics [3] - The Value Score focuses on identifying undervalued stocks using financial ratios like P/E and Price/Sales [4] - The Growth Score evaluates a company's financial health and future outlook through projected earnings and sales [5] - The Momentum Score helps investors capitalize on price trends by analyzing recent price changes and earnings estimate revisions [6] - The VGM Score combines all three Style Scores, providing a comprehensive assessment of stocks based on value, growth, and momentum [7] Zacks Rank and Style Scores Integration - The Zacks Rank is a proprietary model that leverages earnings estimate revisions to guide investors in building successful portfolios, with 1 (Strong Buy) stocks yielding an average annual return of +23.93% since 1988 [8] - Investors are encouraged to select stocks with a Zacks Rank of 1 or 2 and Style Scores of A or B for optimal success [10] - Stocks with lower ranks, even with good Style Scores, may still face downward price pressure due to negative earnings outlooks [11] Company Spotlight: Huntington Ingalls Industries (HII) - Huntington Ingalls Industries, based in Newport News, VA, specializes in designing and maintaining nuclear and non-nuclear ships for the U.S. Navy and Coast Guard [12] - HII holds a Zacks Rank of 3 (Hold) and has a VGM Score of A, indicating solid performance potential [12] - The company has a Momentum Style Score of B, with shares increasing by 7.9% over the past four weeks, and has seen positive earnings estimate revisions for fiscal 2025 [13]

Core Points - HD Hyundai Heavy Industries and Huntington Ingalls Industries have signed a memorandum of agreement to collaborate on building auxiliary vessels for the U.S. Navy [2] Group 1 - The agreement was signed in Gyeongju, South Korea [2]

Group 1 - HD Hyundai Heavy Industries and Huntington Ingalls have agreed to jointly build U.S. navy auxiliary ships [1]

Core Points - HII and HHI signed a memorandum of agreement to enhance collaboration in shipbuilding between the U.S. and South Korea [1][2] - The partnership aims to transform the U.S. shipbuilding industrial base and improve military and commercial shipbuilding capabilities [2][6] - The agreement focuses on four key priorities, including joint investments in distributed shipbuilding and pursuing U.S. Navy contracts [4][5] Group 1: Collaboration and Strategic Engagement - The MOA builds on previous collaborations and aims to jointly pursue the U.S. Navy's next-generation logistics ship design contract [4] - The partnership will leverage HII's shipbuilding experience and HHI's proven designs to respond to U.S. Navy requests [4][6] - Both companies will explore joint investments to strengthen the U.S. shipbuilding industrial base [5] Group 2: Technological and Engineering Collaboration - The collaboration will include engineering, research & development, and technology implementation in areas such as AI/ML, robotics, and automation [5] - HHI has a strong track record in auxiliary vessel delivery, enhancing its competitiveness in the shipbuilding sector [6] Group 3: Future Directions and Events - Eric Chewning will deliver a keynote speech on the strategic collaboration at the Future Tech Forum, highlighting achievements and future directions [7] - Previous agreements included sharing best practices to improve cost efficiency and expand U.S. shipbuilding capacity [8]

Core Points - HII and HHI signed a memorandum of agreement to enhance collaboration in shipbuilding between the U.S. and South Korea [1][2] - The partnership aims to transform the U.S. shipbuilding industrial base and improve military and commercial shipbuilding capabilities [2][6] Group 1: Collaboration Objectives - The MOA focuses on four key priorities: strengthening the U.S. shipbuilding industrial base, pursuing Navy auxiliary shipbuilding programs, collaborating on engineering and technology best practices, and enhancing U.S. Navy support in the Indo-Pacific region [4][5] - Both companies will jointly pursue the U.S. Navy's next-generation logistics ship design contract, leveraging HII's shipbuilding experience and HHI's proven designs [4][5] Group 2: Strategic Importance - The partnership is expected to generate synergies by combining Korea's advanced shipbuilding technologies with the U.S. defense sector's market competitiveness [6] - HHI has a strong track record, having delivered over 2,300 ships globally and demonstrating its capabilities with various navies [10][11] Group 3: Recent Developments - Earlier collaborations included an MOU to improve cost efficiency and construction schedules, and a recent visit by HHI executives to HII's shipyard to strengthen ties [8] - Eric Chewning will deliver a keynote speech on the strategic collaboration at the Future Tech Forum, highlighting the partnership's achievements and future directions [7]