Breaking Down Huntington Ingalls Industries, Inc. (HII) Financial Health: Key Insights for Investors

You're looking at Huntington Ingalls Industries, Inc. (HII) and wondering if the operational turnaround is truly taking hold, and honestly, the Q3 2025 numbers give us a strong signal to work with. The company reported record quarterly revenue of $3.2 billion, a 16.1% jump year-over-year, and net earnings surged by 43.6% to $145 million, which definitely beats the noise about defense spending slowdowns. Their massive, multi-year backlog of $55.7 billion is the clearest sign of long-term demand, but the near-term story is about execution: management is targeting a 15% throughput improvement for the full year 2025, and they've already narrowed their shipbuilding revenue guidance to a tight range of $9.0 billion to $9.1 billion. Still, we need to watch the free cash flow (FCF), which, despite the updated full-year guidance of $550 million to $650 million, showed some Q3 choppiness at just $16 million, plus the timing of major contracts like the Virginia Block 6 submarine remains a risk. Let's break down where the real value is being created and what those segment margins are telling us about the future of their Mission Technologies division.

Revenue Analysis

You need a clear picture of where Huntington Ingalls Industries, Inc. (HII) is making its money, and the story for fiscal year 2025 is one of steady growth driven by core defense spending. The company's total revenue for the trailing twelve months (TTM) ending September 30, 2025, reached approximately $12.012 billion, marking a year-over-year increase of 2.6%. That's a solid, if unspectacular, climb for a company anchored to long-cycle government contracts.

The revenue breakdown is straightforward, dominated by the two primary business segments: Shipbuilding and Mission Technologies. Shipbuilding remains the powerhouse, but the Mission Technologies segment is defintely a key growth driver. For the full fiscal year 2025, HII's guidance points to a total revenue range of $11.8 billion to $12.2 billion, which is right in line with the Street's consensus of approximately $12.08 billion.

Segment Contribution to Overall Revenue

The vast majority of HII's revenue still comes from its role as America's largest military shipbuilder. Based on the 2025 full-year guidance midpoint, the segment split is clear:

• Shipbuilding: Expected to contribute about 75% of total revenue.
• Mission Technologies: Expected to contribute about 25% of total revenue.

Here's the quick math on the 2025 guidance, showing where the dollars are expected to land:

Primary Revenue Sources and Growth Drivers

The Shipbuilding segment is further broken down into Newport News Shipbuilding and Ingalls Shipbuilding. Newport News, which handles the massive nuclear-powered programs, saw Q3 2025 revenue hit $1.6 billion, driven by higher volumes in the Columbia-class and Virginia-class submarine programs. Ingalls Shipbuilding, focusing on surface combatants, posted Q3 revenue of $828 million, a significant 24.7% increase year-over-year, primarily from higher volumes in surface combatants.

The Mission Technologies segment, which is where HII diversifies into defense services, is seeing strong growth. This segment reported Q3 2025 revenue of $787 million, an 11.0% increase from the prior year. This growth is fueled by increasing demand for high-margin capabilities like unmanned systems, Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance (C5ISR), cyber, electronic warfare, and live, virtual, and constructive (LVC) training solutions. This is where the future growth is being built. For a deeper dive into the risks and opportunities, you can read more here: Breaking Down Huntington Ingalls Industries, Inc. (HII) Financial Health: Key Insights for Investors.

Profitability Metrics

You need to know if Huntington Ingalls Industries, Inc. (HII) is turning massive defense contracts into solid, scalable profit. The short answer is yes, but with the tight margins typical of heavy manufacturing and government work. Your key takeaway is that HII's operational efficiency is improving-Q3 2025 saw a significant jump in operating margin-but it still trails the broader Aerospace & Defense (A&D) sector average, which is a structural reality of the shipbuilding business.

Gross, Operating, and Net Profit Margins: The 2025 View

For the third quarter of fiscal year 2025, Huntington Ingalls Industries reported strong top-line growth, with revenues hitting a record $3.2 billion. Here's the quick math on where the money went, which is crucial for understanding the core business health (Gross Profit), management efficiency (Operating Profit), and final investor takeaway (Net Profit).

• Gross Profit Margin: At around 12.34% in Q3 2025, this margin reflects the high cost of building complex naval vessels, like aircraft carriers and submarines. The gross profit for the quarter was $394 million. This is a low margin compared to many defense-tech firms, but it's typical for a capital-intensive shipbuilder.
• Operating Profit Margin: This is where you see management's control over overhead. HII's Q3 2025 operating income was $161 million, translating to an operating margin of 5.0%. This figure is a clear sign of operational improvement, but it's still relatively thin.
• Net Profit Margin: The bottom line for shareholders. Net earnings for Q3 2025 were $145 million, giving a net profit margin of approximately 4.53%. Analyst estimates for the full-year 2025 net profit margin hover around 4.7%.

The gross margin is the true indicator of their cost of goods sold (COGS) efficiency. It's low, so every dollar of revenue has a lot of cost baked in. Mission Statement, Vision, & Core Values of Huntington Ingalls Industries, Inc. (HII).

Operational Efficiency and Profitability Trends

The trend in operating margin is the most compelling story for HII right now. The company is defintely getting better at managing its operations. In Q3 2025, the operating margin of 5.0% was a substantial increase from the 3.0% reported in the same quarter of 2024. This improvement, driven largely by better results at Newport News Shipbuilding and Ingalls Shipbuilding, suggests that targeted investments in workforce and supply chain are beginning to pay off.

What this hides, still, are the persistent labor shortages and supply chain disruptions that continue to be a headwind. Management is guiding for a full-year 2025 Shipbuilding operating margin between 5.5% and 6.5%. Hitting the high end of that range would signal that their operational initiatives are gaining serious traction, which is a clear action item for you to track in future reports.

HII's Profitability Versus the Industry

When you compare HII to the broader Aerospace & Defense sector, you need to remember that HII is primarily a heavy shipbuilder, which is a different beast than an aircraft manufacturer or a pure defense-tech firm. Heavy manufacturing is inherently lower-margin.

Here's a quick comparison table using the best available industry benchmarks:

The A&D industry average operating margin was about 8.8% in 2023. HII's 5.0% operating margin is markedly lower. This gap isn't a failure; it's the cost of doing business in a highly specialized, government-contracted, heavy-asset environment. For you, the investor, this means HII's profit is less sensitive to commercial market swings but is extremely sensitive to program execution, cost overruns, and government funding stability. The lower margin means they have less cushion when things go wrong.

Next Step: Review the Q4 2025 report for confirmation that the shipbuilding operating margin guidance of 5.5% to 6.5% was met, as this will confirm the improving operational efficiency trend.

Debt vs. Equity Structure

You want to know if Huntington Ingalls Industries, Inc. (HII) is taking on too much risk to finance its growth. The short answer is no, but their capital structure is more debt-reliant than the industry average, which is something to watch.

As of the third quarter of 2025, HII's financial leverage is conservative by historical standards, but it sits above the sector benchmark. Their debt-to-equity (D/E) ratio-a key measure of financial leverage-was 0.59 as of September 2025. This means for every dollar of shareholder equity, HII uses about 59 cents of debt to finance its assets. This is the lowest D/E ratio HII has reported in over a decade, which is defintely a positive trend.

Here's the quick math on the balance sheet:

• Total Stockholders' Equity (Sep 2025): $4,984 million
• Total Debt (Long-Term & Short-Term, Sep 2025): $2,926 million

Debt Levels and Industry Comparison

The company's debt profile is heavily skewed toward long-term obligations, which is typical for a capital-intensive business like shipbuilding. For the quarter ending September 2025, HII reported a long-term debt and capital lease obligation of $2,926 million, with virtually no short-term debt. This structure mitigates near-term liquidity risk, pushing repayment obligations far out into the future.

To be fair, HII's D/E ratio of 0.59 is higher than the broader Aerospace & Defense industry average of about 0.38 as of November 2025. This gap suggests HII is using more debt financing than its peers, which can amplify returns in good times but also increase interest expense volatility. Still, a D/E ratio under 1.0 is generally considered healthy, indicating that equity holders finance the majority of the company's assets.

Recent Financing and Credit Health

HII has been active in managing its debt maturity schedule. In late 2024, the company completed a $1 billion senior notes offering, split into $500 million at 5.353% due in 2030 and $500 million at 5.749% due in 2035. This move was strategic, securing long-term funding at fixed rates. Plus, it provided capital ahead of a $500 million tranche of 3.844% Senior Notes that were set to mature in 2025.

The company's credit health is solid. In November 2025, S&P Global Ratings affirmed HII's investment-grade rating of 'BBB-' and, importantly, revised their outlook to stable from negative. This positive change reflects improved cash flow generation and shipbuilding efficiency, which strengthens their ability to service debt.

The balance is clear: HII uses debt strategically-to fund capital investments and manage its working capital-while maintaining a capital structure where equity remains the primary source of funding. You can read more about this in our full analysis: Breaking Down Huntington Ingalls Industries, Inc. (HII) Financial Health: Key Insights for Investors.

Next Step: Portfolio Manager: Note the $500 million debt maturity in 2025 and confirm the refinancing strategy is fully executed.

Liquidity and Solvency

You want to know if Huntington Ingalls Industries, Inc. (HII) has the cash to cover its near-term bills, and honestly, the picture is complex but manageable. The company's liquidity ratios are tight, which is common in the defense contracting world, but a massive cash flow rebound in the second quarter of 2025 defintely eased any immediate concerns.

Assessing Huntington Ingalls Industries, Inc. (HII)'s Liquidity

When we look at the balance sheet for the first quarter of fiscal year 2025, the ratios show a company operating with very little margin for error. The Current Ratio, which measures current assets against current liabilities, stood at just 1.06 ($3,042 million in Current Assets divided by $2,856 million in Current Liabilities) as of March 31, 2025. A ratio of 1.0 means they can just cover their short-term debt; 1.06 is barely above that line. The Quick Ratio (or Acid-Test Ratio), which strips out inventory-because you can't pay a bill with a half-built aircraft carrier-was even tighter at 0.99 for the same period.

This is a major shipbuilder, so a Quick Ratio below 1.0 isn't a panic button, but it means they rely heavily on collecting receivables and managing contract assets to meet obligations. They are not sitting on mountains of easily liquidated cash. The working capital trend, which is simply current assets minus current liabilities, tells a similar story. For Q1 2025, it was a modest positive of $186 million. That's positive, but it's a slim cushion for a company of HII's size. You can dive deeper into the investor base with Exploring Huntington Ingalls Industries, Inc. (HII) Investor Profile: Who's Buying and Why?

Cash Flow Statements Overview and Trends

The cash flow statement is where the real action is, and it shows a huge swing in the first half of 2025. Q1 was rough, but Q2 was a powerhouse. Here's the quick math on the first two quarters of 2025 (in millions of US Dollars):

The net cash used in operating activities of $395 million in Q1 2025 was a significant drain, mostly tied to the timing of contract payments and working capital changes. But the second quarter saw a massive reversal, with net cash provided by operating activities soaring to $823 million. This volatility is normal for a company with large, long-term government contracts, but it means you must look beyond a single quarter.

Investing cash flow is consistently negative, as HII continues to spend on capital expenditures-investing in the shipyards and facilities, which is what you want to see for a capital-intensive business. For the first half of 2025, they were net users of cash in investing activities. Financing cash flow is also a net use of cash, driven by dividends paid and debt repayments, showing a commitment to returning capital to shareholders and managing the balance sheet.

Potential Liquidity Concerns or Strengths

The primary strength for Huntington Ingalls Industries, Inc. (HII) is the long-term, high-certainty nature of its business-building ships for the U.S. Navy. The company's guidance for full-year 2025 free cash flow (operating cash flow minus capital expenditures) is a healthy $500 million to $600 million, an increase from earlier estimates. This forecast is the most important signal, as it confirms the Q2 surge was not a fluke and that the company expects to generate significant cash after capital investment.

The main potential concern is that tight Current and Quick Ratios mean any unexpected delay in a major contract payment (a trade receivable) could put immediate pressure on the company's ability to pay its trade accounts payable. But the positive free cash flow guidance and the record $56.9 billion backlog as of June 30, 2025, provide a strong structural foundation. The cash is coming; it's just a matter of when. The overall liquidity position is adequate, not stellar, but the massive backlog provides solvency strength that ratios alone don't capture.

Valuation Analysis

You're looking at Huntington Ingalls Industries, Inc. (HII) right now and asking the core question: is the market getting ahead of itself, or is this defense giant still a buy? The direct takeaway for the 2025 fiscal year is that HII appears overvalued based on traditional metrics and its recent, aggressive stock price run, but the long-term backlog justifies a 'Hold' rating from most analysts.

The stock has had a phenomenal year. Over the last 12 months leading up to November 2025, Huntington Ingalls Industries' stock price soared by over 56.49%, closing recently around $305.49. That's a huge move, driven by strong defense spending and a massive shipbuilding backlog. The stock's 52-week range tells the story: it moved from a low of $158.88 to a high of $330.00. That kind of rapid appreciation naturally compresses your margin of safety, which is why the stock is trading above its estimated fair value of around $265.60.

Here's the quick math on why the stock looks pricey right now. When we look at the 2025 fiscal year estimates, the valuation multiples are stretched compared to historical norms. The market is pricing in significant future growth, which is a defintely risk if there are any operational delays in their major shipbuilding programs.

• Price-to-Earnings (P/E) Ratio: The forward P/E for 2025 is estimated at 20.4x. This is notably higher than its historical average, suggesting investors are paying a premium for every dollar of HII's expected 2025 earnings.
• Price-to-Book (P/B) Ratio: At an estimated 2.37x for 2025, this shows the stock is trading at more than double its book value. For a capital-intensive shipbuilder, this signals a high market confidence in the value of their assets and future contract execution.
• Enterprise Value-to-EBITDA (EV/EBITDA): The 2025 estimate sits at 14.4x. This is a critical measure for a company with significant debt and capital expenditure; a higher multiple here implies a rich valuation relative to its core operational cash flow before financing costs.

Still, you can't ignore the dividend. Huntington Ingalls Industries has a strong track record, having increased its dividend for 13 consecutive years. For the 2025 fiscal year, the annual forward dividend is projected to be $5.52 per share, giving a modest dividend yield of about 1.80%. The good news is the payout ratio is sustainable. Based on 2025 earnings estimates, the payout ratio is a healthy 39.46%, meaning they are only paying out less than two-fifths of their earnings as dividends, leaving plenty of capital for reinvestment and debt service.

The analyst community is aligned on the current situation: the consensus rating is a Hold. They see the company as fairly valued at these levels, acknowledging the excellent long-term outlook-which you can review in their Mission Statement, Vision, & Core Values of Huntington Ingalls Industries, Inc. (HII)-but also recognizing the near-term valuation stretch. The stock has run too far, too fast, so the upside is limited for now.

Your action here is clear: if you are a long-term investor, Hold your position. If you are looking to start a new position, wait for a pullback closer to the $265 mark. Finance: Monitor the next earnings call for any changes to the 2025 EPS guidance, as that will instantly re-rate the P/E multiple.

Risk Factors

You're looking at Huntington Ingalls Industries, Inc. (HII) and seeing a massive backlog-a record $56.9 billion as of Q2 2025-which signals immense stability. That's the good news. But in a capital-intensive business tied to government spending, stability doesn't mean zero risk. The biggest near-term challenges are operational execution and the political calendar, not a lack of demand.

The core of HII's risk profile centers on its two massive shipyards, Newport News and Ingalls. Any hiccup there immediately hits the bottom line. For example, the Q2 2025 operating income dip to $163 million, down from $189 million in Q2 2024, was largely attributed to less favorable results at Newport News Shipbuilding. This is why management has been so focused on improving throughput, targeting an approximate 15% improvement for 2025, a critical metric to watch. Operational efficiency is everything.

Here's a breakdown of the key risks and what HII is doing about them:

• Operational & Execution Risk: This is the most immediate concern. Incidents like the past noncompliance with welding procedures at Newport News raise flags about quality control and can derail project timelines. Also, the tight labor market remains a headwind, even with HII's efforts to stabilize the workforce through higher wages and better retention.
• Financial & Contract Timing Risk: HII is almost entirely dependent on the U.S. government. While the backlog is huge, delays in government appropriations or the final award of major contracts-like the Block VI Virginia and Build II Columbia-class submarines-can create a cash flow headwind. The company's 2025 free cash flow guidance of $550 million to $650 million is predicated on the timing of these awards.
• Supply Chain & Regulatory Risk: The defense industrial base is fragile. Approximately 70% of purchase orders for Newport News are to single or sole-source suppliers, according to a 2025 report. Increased regulatory compliance costs for these smaller suppliers could cause significant supply chain disruptions, impacting HII's ability to meet delivery schedules.

To be fair, HII is defintely not sitting still. They have clear mitigation strategies in place. They're running a $250 million annualized cost reduction initiative, and they've partnered with companies like C3 AI to use artificial intelligence for optimizing shipbuilding efficiency. Plus, easing supply chain constraints and a favorable tax change in the 2025 Federal budget-which is expected to provide a benefit of more than $150 million this year-are giving them some breathing room. Still, these are long-cycle programs, and the risks won't disappear overnight.

You need to keep an eye on the shipbuilding margin guidance, which remains conservative at 5.5% to 6.5% for 2025, despite the revenue growth. If they can sustain the throughput gains and translate them into margin expansion, that tells you the operational risks are receding. For a deeper dive into who is betting on HII's ability to navigate these waters, you should be Exploring Huntington Ingalls Industries, Inc. (HII) Investor Profile: Who's Buying and Why?

The takeaway is simple: HII has a rock-solid business foundation, but the speed of its financial improvement depends entirely on its ability to execute flawlessly in the shipyards and navigate the political budget cycle.

Growth Opportunities

You're looking for a clear path forward for Huntington Ingalls Industries, Inc. (HII), and the picture is one of disciplined execution finally translating a massive order book into tangible financial results. The direct takeaway is that HII's growth is locked in for the near term, driven by a record backlog of nearly $57 billion and a strategic pivot to boost production throughput.

The company is defintely moving past the operational headwinds of previous years. The focus now is on converting that backlog-the work already contracted-into revenue, and the 2025 fiscal year data shows this process is accelerating. That's the core of the opportunity here.

Contract Momentum and Revenue Trajectory

HII's financial health starts with its order pipeline, which is unparalleled in the US defense sector. As of the second quarter of 2025, the total contracted backlog stood at a record $56.9 billion, a testament to its cornerstone role in the U.S. Navy's modernization and fleet expansion plans.

This stability provides clear revenue visibility for years. Here's the quick math on the near-term outlook: the company has updated its full-year 2025 guidance, projecting Shipbuilding revenue to land between $9.0 billion and $9.1 billion, and Mission Technologies revenue between $3.0 billion and $3.1 billion. This steady top-line growth, coupled with operational improvements, is expected to push diluted earnings per share (EPS) up to an analyst consensus of around $15.02 for the full year 2025.

• Shipbuilding sales rose 18% in Q3 2025.
• Mission Technologies sales grew 11% in Q3 2025.
• Full-year 2025 free cash flow is guided between $550 million and $650 million.

Operational and Product Innovations

The real story of HII's growth isn't just the contracts; it's how they're building the ships. The primary growth driver for 2025 is a relentless focus on 'throughput'-the speed and efficiency of production. HII is targeting an approximately 15% improvement in throughput for the full year 2025.

This efficiency drive is supported by two key areas: people and technology. On the workforce side, HII hired more than 4,600 shipbuilders in 2025 alone to stabilize the labor base. On the technology side, product innovations are driving the Mission Technologies segment, which is a crucial diversifier.

• Digital Tools: A strategic partnership with C3 AI is aimed at applying artificial intelligence (AI) to optimize shipbuilding efficiency.
• Advanced Manufacturing: HII successfully installed a 3D-printed valve on the USS Enterprise, a major milestone for additive manufacturing in naval construction.
• Unmanned Systems: The unveiling of the ROMULUS unmanned surface vessel line, powered by Odyssey Autonomy software, positions HII for the future of naval warfare.

Strategic Partnerships and Competitive Edge

HII's competitive advantage is simple: they are one of only two major naval shipbuilders in the U.S., and they are the only one capable of building nuclear-powered aircraft carriers. This is a high barrier to entry, and it guarantees HII a central role in the nation's defense strategy for decades. But they aren't resting on legacy.

The company is actively expanding its industrial base through a 'distributed shipbuilding' strategy, which has grown to include 23 partners to enhance capacity and schedule adherence. Also, international partnerships with companies like Babcock International and a memorandum of understanding with HD Hyundai Heavy Industries are exploring new market and production opportunities. You can see their long-term focus on capability in their Mission Statement, Vision, & Core Values of Huntington Ingalls Industries, Inc. (HII).

What this estimate hides is the inherent risk in government contracting-budgetary changes and program delays are always possible. Still, HII's dominance in nuclear shipbuilding and its growing, high-margin Mission Technologies segment provide a robust framework for growth. The next step is to watch the Q4 2025 results to confirm the sustained throughput improvement. Finance: Confirm Q4 throughput metrics by the next earnings call.