Company Overview - HII is a global, all-domain defense provider focused on delivering powerful ships and solutions to protect peace and freedom worldwide [2] - As the largest military shipbuilder in the U.S., HII has a history of over 135 years in advancing national security [3] - The company employs a workforce of 44,000 [3] Upcoming Events - HII will participate in Bernstein's Strategic Decisions Conference on May 28, with a conversation featuring President and CEO Chris Kastner scheduled for 3:30 p.m. Eastern time [1]

Core Viewpoint - Huntington Ingalls Industries (HII) has shown strong stock market performance in 2025, delivering a 21% return to shareholders year to date [1] Group 1: Company Overview - Huntington Ingalls Industries is the largest military shipbuilder in the United States, poised to benefit from increased funding for domestic shipbuilding programs proposed by the new Trump administration [2] - The company has a significant order backlog of $48 billion and anticipates over $50 billion in additional awards in the next 20 months, enhancing its earnings potential [9] Group 2: National Security Role - The company plays a critical role in national security by constructing advanced naval vessels, including the only U.S. facility capable of building Gerald R. Ford-class aircraft carriers [4] - Huntington Ingalls also produces Arleigh Burke-class destroyers and develops uncrewed undersea vehicles, showcasing its diverse defense capabilities [5][6] Group 3: Impact of Trump's Defense Agenda - The Trump administration's focus on revitalizing U.S. military strength and enhancing domestic shipbuilding capabilities is expected to benefit Huntington Ingalls [7][8] Group 4: Financial Performance and Growth Outlook - In Q1, Huntington Ingalls reported revenue of $2.7 billion, a 2.5% decline year over year, but earnings per share (EPS) of $3.97 exceeded expectations [10] - The company projects full-year shipbuilding revenue between $8.9 billion and $9.1 billion, indicating a 3% increase from 2024 [10] - A new production site near Charleston, South Carolina, is expected to increase capacity by 20%, supporting future growth [11] Group 5: Dividend and Valuation - Huntington Ingalls has a quarterly dividend of $1.35 per share, yielding 2.31%, and has increased its annual dividend for the past 13 years, indicating potential for future growth [11] - The company trades at a forward price-to-earnings (P/E) ratio of 16, which is lower than the average of 19 for its defense sector peers, suggesting it may be undervalued [13][14] Group 6: Investment Perspective - The overall outlook for Huntington Ingalls is positive, with strong fundamentals and strategic positioning in the defense sector making it an attractive option for investors [16]

Industry Overview - The Zacks Aerospace-Defense industry includes companies that design and manufacture military and commercial aircraft, combat vehicles, missiles, and space transportation vehicles [2] - It also encompasses cybersecurity firms providing IT services and C4ISR solutions, along with defense contractors offering spare parts and maintenance services [3] Key Trends - Improved air traffic outlook is boosting growth prospects, with global air passenger traffic revenue per kilometer increasing by 3.3% year over year to 738.8 billion [4] - The U.S. defense budget is projected to increase by 13% to $1.01 trillion for fiscal year 2026, which will benefit defense-focused companies [5] - Supply-chain disruptions continue to pose challenges, particularly affecting smaller suppliers in the commercial aerospace sector, with a projected drop in aircraft deliveries from 2,293 to 1,802 in 2025 due to these bottlenecks [6][7] Industry Performance - The Aerospace-Defense industry has underperformed compared to the Zacks S&P 500 composite and its own sector, with a collective gain of 7.2% over the past year, while the Aerospace sector grew by 11.9% and the S&P 500 by 8.3% [12] - The industry currently holds a Zacks Industry Rank of 92, placing it in the top 37% of over 250 Zacks industries, indicating positive near-term prospects [9] Valuation Metrics - The industry is trading at a trailing 12-month EV/Sales ratio of 2.82, compared to the S&P 500's 4.86 and the sector's 2.51 [15] Company Highlights - **Airbus Group**: Revenues improved by 6% year over year, with earnings per share increasing by 33%. The 2025 sales estimate is $82.57 billion, reflecting a 10.4% increase from the previous year [18][19] - **Leidos Holdings**: Revenues grew by 7% year over year to $4.25 billion, with adjusted earnings up by 30%. The 2025 sales estimate indicates a 2.7% improvement from 2024 [22][23] - **Huntington Ingalls Industries**: Received orders worth $2.1 billion in the first quarter, with a total backlog of $48 billion as of March 31, 2025. The 2025 sales estimate shows a 3.5% increase from 2024 [26][27]

Group 1: Deere (DE) - Deere's stock has increased over 16% year-to-date, driven by optimism regarding easing trade tensions [3] - The company reported a first-quarter net income of $869 million, with a full-year forecast of $5 billion to $5.5 billion, but faced a 30% revenue decline and a 50% drop in net income compared to the previous year [5] - Deere's supply chain is relatively protected against tariffs due to domestic manufacturing, and the company is expected to address supply chain adjustments in its upcoming earnings call [9] Group 2: Energy Transfer (ET) - Energy Transfer has a distribution yield of 7.5% and plans to invest $5 billion in growth capital expenditures in 2025, significantly higher than its maintenance capital expenditures of $1.1 billion [12] - The company is in discussions to develop a large LNG export facility in Lake Charles, Louisiana, which could enhance its position in the energy market [13] - The current administration's business-friendly policies are expected to support the development of U.S. energy assets, benefiting companies like Energy Transfer [11] Group 3: Huntington Ingalls Industries (HII) - Huntington Ingalls' shares have risen over 20% in 2025, contrasting with a nearly 4% dip in the S&P 500, and the company offers a forward yield of 2.3% [14] - The company reported first-quarter revenue of $2.7 billion, below expectations, but exceeded earnings estimates with an EPS of $3.79 [15] - Management reaffirmed a 2025 forecast of shipbuilding revenue between $8.9 billion and $9.1 billion, alongside a free cash flow projection of $300 million to $500 million [16]

Group 1 - More than two dozen high school seniors have accepted job offers to start their shipbuilding careers at HII's Newport News Shipbuilding division [1] - The Newport News Shipbuilding division participated in the NHREC Good Life Solution Program's Career Selection Day, where 18 students accepted employment offers for full-time positions or apprenticeships [2] - The Apprentice School offers tuition-free apprenticeships in 19 trades and seven optional programs, funded by HII to develop the next generation of shipbuilders [2][4] Group 2 - The Good Life Solution Program aims to enhance recruitment, hiring, training, and retention of entry-level hires from high schools through partnerships between NHREC and local employers [3] - A ceremony was held to recognize students from the Youth Builders program, with 13 students accepting offers to attend The Apprentice School [4] - HII's mission is to deliver powerful ships and all-domain solutions to support national security, with a workforce of 44,000 [7][8]

Investors interested in Aerospace - Defense stocks are likely familiar with Huntington Ingalls (HII) and RTX (RTX) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific ...

The U.S. shipbuilding industry has been in a lull since the height of the pandemic, with companies tied to pre-COVID contracts that are not nearly as profitable now.But the budget winds in Washington appear to be shifting, and Huntington Ingalls Industries (HII -1.06%) is likely to be one of the primary beneficiaries if they do. Shares of Huntington Ingalls traded up 12.9% in April, according to data provided by S&P Global Market Intelligence, as investors begin to climb on board for what they believe will ...

Core Points - Huntington Ingalls Industries, Inc. (HII) reported first-quarter 2025 earnings of $3.79 per share, a decline of 2.1% from $3.87 in the prior-year quarter, but exceeded the Zacks Consensus Estimate of $2.90 by 30.7% [1] - Total revenues for the quarter were $2.73 billion, missing the Zacks Consensus Estimate of $2.79 billion by 2% and declining 2.5% from $2.81 billion in the year-ago quarter due to lower sales volume across all business segments [2] Operational Performance - Segmental operating income was $171 million, slightly up from $170 million in the first quarter of 2024, with an operating margin expansion of 19 basis points to 6.3% [3] - The increase in operating income was mainly driven by better performance in the Newport News Shipbuilding and Mission Technologies units [3] Orders and Backlog - HII received orders worth $2.1 billion in the first quarter of 2025, resulting in a total backlog of $48 billion as of March 31, 2025, down from $48.7 billion as of December 31, 2024 [4] Segmental Performance - Newport News Shipbuilding: Revenues totaled $1.40 billion, down 2.6% year over year, with operating income of $85 million, up 3.7% year over year due to contract incentives from the Virginia-class submarine program [5] - Ingalls Shipbuilding: Revenues were $637 million, down 2.7% year over year, with operating earnings of $46 million, down 23.3% year over year due to lower performance in amphibious assault ships [6] - Mission Technologies: Revenues totaled $735 million, down 2% year over year, with operating income increasing 42.9% year over year to $40 million, driven by higher performance in cyber, electronic warfare & space, and uncrewed systems [6][7] Financial Update - Cash and cash equivalents as of March 31, 2025, were $167 million, significantly down from $831 million as of December 31, 2024 [8] - Long-term debt remained at $2.70 billion as of March 31, 2025, consistent with the end of 2024 [8] - Cash used in operating activities was $395 million compared to $202 million a year ago [8] - Free cash outflow was $462 million in the first quarter of 2025, higher than $274 million in the prior-year period [9] 2025 Guidance - HII reaffirmed its 2025 guidance, expecting shipbuilding revenues in the range of $8.9-$9.1 billion and Mission Technologies revenues in the range of $2.9-$3.1 billion [10] - The company projects free cash flow to be between $300-$500 million [10]

Financial Performance - Sales and service revenues for the three months ended March 31, 2025, decreased by $71 million, or 3%, compared to the same period in 2024, primarily due to lower volumes at Newport News, Ingalls, and Mission Technologies[89]. - Operating income for the three months ended March 31, 2025, was $161 million, an increase of $7 million, or 5%, compared to $154 million in the same period in 2024[86]. - General and administrative expenses increased by $14 million, or 6%, to $246 million for the three months ended March 31, 2025, primarily due to higher overhead costs[97]. - Segment operating income for the three months ended March 31, 2025, was $171 million, reflecting a slight increase of $1 million, or 1%, compared to $170 million in the same period in 2024[101]. - Interest expense increased by $7 million, or 33%, to $28 million for the three months ended March 31, 2025, compared to $21 million in the same period in 2024[86]. - For the three months ended March 31, 2025, total sales and service revenues decreased by $71 million, or 3%, to $2,734 million compared to $2,805 million in the same period of 2024[108]. - Ingalls segment sales and service revenues decreased by $18 million, or 3%, to $637 million, primarily due to lower volumes in amphibious assault ships[112][113]. - Newport News segment sales and service revenues decreased by $38 million, or 3%, to $1,396 million, driven by lower volumes in aircraft carriers and naval nuclear support services[115][116]. - Mission Technologies segment sales and service revenues decreased by $15 million, or 2%, to $735 million, primarily due to lower volumes in C5ISR[118][119]. - Operating income for the three months ended March 31, 2025, increased by $7 million, or 5%, to $161 million compared to $154 million in the same period in 2024[108]. - Ingalls segment operating income decreased by $14 million, or 23%, to $46 million, primarily driven by lower performance on amphibious assault ships[112][114]. - Newport News segment operating income increased by $3 million, or 4%, to $85 million, primarily due to contract incentives on the Virginia class submarine program[115][117]. - Mission Technologies segment operating income increased by $12 million, or 43%, to $40 million, driven by higher performance in cyber, electronic warfare & space[118][120]. Budget and Funding - The fiscal year 2025 budget cycle concluded with the passage of the Full-Year Continuing Appropriations and Extensions Act, which included funding for key shipbuilding programs[80]. - The federal budget environment remains a significant long-term risk, with continued uncertainty in defense discretionary spending impacting the defense industrial base[79]. Cash Flow and Investments - Cash used in operating activities for the three months ended March 31, 2025, was $395 million, compared to $202 million in the same period in 2024, largely due to unfavorable changes in trade working capital[138]. - Cash used in investing activities for the three months ended March 31, 2025, was $199 million, significantly higher than $71 million in the same period in 2024, primarily due to the acquisition of W International[140]. - Free cash flow for the three months ended March 31, 2025, decreased by $188 million to $(462) million from $(274) million in 2024, mainly due to unfavorable changes in trade working capital[143]. - Cash used in financing activities for the three months ended March 31, 2025, was $70 million, a decrease from $147 million in the same period in 2024, primarily due to a reduction in common stock repurchases[141]. Backlog and Contracts - Total backlog as of March 31, 2025, was $48.0 billion, a decrease from $48.7 billion as of December 31, 2024, with approximately 22% expected to convert into sales in 2025[132]. - New contract awards during the three months ended March 31, 2025, were approximately $2.1 billion, primarily driven by awards at Newport News[134]. Workforce and Operations - The Company employs over 44,000 people domestically and internationally, highlighting its significant workforce in the defense sector[75]. Geopolitical and Economic Environment - The global geopolitical and economic environment continues to be impacted by heightened tensions and instability, affecting the market for defense products and services[81]. Interest and Tax Rates - The effective income tax rate for the three months ended March 31, 2025, was 20.3%, up from 16.8% in 2024, mainly due to excess tax benefits recognized on stock-based compensation in the prior period[130]. - Interest expense for the three months ended March 31, 2025, increased to $28 million from $21 million in the same period in 2024, due to an increase in outstanding long-term debt[126]. - The Operating FAS/CAS Adjustment was a net expense of $10 million for the three months ended March 31, 2025, compared to $17 million in the same period in 2024, primarily driven by higher interest rates under FAS[104]. - For the three months ended March 31, 2025, the non-operating retirement benefit increased to $48 million from $44 million in the same period in 2024, primarily due to the amortization of net actuarial costs[128]. Capital Expenditures and Financial Position - Capital expenditures for maintenance and sustainment in 2025 are expected to be approximately 1.0% to 1.5% of annual revenues, with discretionary capital expenditures expected to be around 2.0% to 2.5%[141]. - As of March 31, 2025, the company had $12 million in undrawn letters of credit and $389 million in outstanding surety bonds, with no significant off-balance sheet arrangements[145]. - The company has a $1.7 billion revolving credit facility and a $1.7 billion commercial paper program, with no indebtedness outstanding as of March 31, 2025, indicating no interest rate risk from these instruments[155]. Construction and Development Projects - The company is constructing 12 new Columbia class (SSBN 826) submarines to replace the aging Ohio class, with the first submarine's construction beginning in 2020 and long-lead-time material contracts awarded for the next five boats in 2023[152]. - The company delivered USS Gerald R. Ford (CVN 78) to the U.S. Navy in Q2 2017, and has received contracts for the detail design and construction of John F. Kennedy (CVN 79), Enterprise (CVN 80), and Doris Miller (CVN 81)[152]. - The company has contracts to construct multiple Arleigh Burke class (DDG 51) destroyers, including Ted Stevens (DDG 128) and Jeremiah Denton (DDG 129), with deliveries made for USS Frank E. Petersen Jr. (DDG 121) in 2021, USS Lenah H. Sutcliffe Higbee (DDG 123) in 2022, and USS Jack H. Lucas (DDG 125) in 2023[152]. - The company delivered USS Fort Lauderdale (LPD 28) in 2022 and received a long-lead-time material contract for Philadelphia (LPD 32), with further modifications awarded in 2023[153]. - The company is currently constructing Bougainville (LHA 8) and Fallujah (LHA 9) as part of the America class (LHA 6) amphibious assault ships program, with a contract modification awarded for Helmand Province (LHA 10) in 2024[152]. - The company has delivered 10 out of 11 planned Legend class National Security Cutters (NSCs), which are the largest and most advanced cutters in the U.S. Coast Guard[153]. - The company is constructing Virginia class (SSN 774) fast attack submarines as the principal subcontractor to Electric Boat, tailored for a wide range of warfighting missions[153]. Inflation Risks - The company is exposed to inflation risks affecting raw materials and components, and mitigates this by negotiating long-term agreements and incorporating price escalation provisions in contracts[156]. - The company expects persistent cost inflation to potentially impact its financial position and cash flows if long-term inflationary conditions continue[156].

Core Insights - HII's Ingalls Shipbuilding hosted a "signing day" for 43 graduates of its Shipbuilder Academy, marking the start of their careers with the company [1][6] - The event coincided with National Apprenticeship Day, emphasizing the importance of connecting individuals to meaningful careers and building a skilled workforce [2] - The Ingalls Shipbuilder Academy provides hands-on training, mentorship, and classroom instruction to prepare students for careers in shipbuilding [2][3] Company Initiatives - The Ingalls Shipbuilder Academy has graduated over 450 students since its inception in 2016, demonstrating the company's commitment to investing in local workforce development [9] - Ingalls has partnerships with 13 high schools along the Gulf Coast to nurture a talent pipeline for future shipbuilders [9] - In addition to the Shipbuilder Academy, Ingalls supports technical programs at three local high schools, further enhancing educational opportunities for students [10] Student Impact - Graduates like Tommie Bettis and Randi Vickers expressed pride in their new roles, highlighting the personal significance of joining Ingalls and continuing family traditions in skilled trades [7][8] - The signing ceremony resembled traditional athletic signing events, showcasing the importance of these career opportunities for students [6]