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HUNTINGTON INGALLS INDUSTRIES, INC. (HII)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue was $2.734B (-2.5% YoY; -9.0% QoQ), while diluted EPS was $3.79 (+20% QoQ; -2% YoY). Backlog ended at $48.0B with $2.1B in new awards . EPS beat Street, revenue was slightly below [Q1 2025 consensus EPS $2.88*, revenue $2.786B* vs actual $3.79 and $2.734B].
  • Segment performance mixed: Newport News Shipbuilding (NNS) margin improved on contract incentives; Mission Technologies expanded margin; Ingalls margin stepped down on amphib program performance .
  • Free cash flow was -$462M on timing of incentives and working capital (in line with quarterly guide), dividend paid was $1.35/share; cash balance $167M; liquidity ~$1.5B; a $500M note was repaid post-quarter .
  • Guidance reaffirmed: FY25 shipbuilding revenue $8.9–$9.1B; shipbuilding operating margin 5.5–6.5%; Mission Technologies revenue $2.9–$3.1B, margin 4.0–4.5%; FY25 FCF $300–$500M. Q2 FCF $200–$300M; shipbuilding margins guided near low end .
  • Catalysts: cost-type 2-boat Block V award (supports workforce and parts availability), outsourcing ramp, HD Hyundai MOU, and uncrewed/laser wins in Mission Technologies .

What Went Well and What Went Wrong

  • What Went Well

    • NNS margin improved to 6.1% on Virginia-class incentives and Columbia volume; consolidated operating margin rose to 5.9% (+40 bps YoY) .
    • Mission Technologies margin expanded to 5.4% (from 3.7% YoY) with strong performance in cyber, EW & space and uncrewed systems .
    • Strategic momentum: signed MOU with HD Hyundai to accelerate ship production; delivered first Lionfish UUVs; selected to develop high-energy laser counter-UAS prototype .
    • Management quote: “We intend to reach our goal of $250 million in annualized cost reduction by year's end” .

  • What Went Wrong

    • Revenue declined across all segments (NNS, Ingalls, Mission Tech) on lower volumes, and consolidated revenue fell 2.5% YoY .
    • Free cash flow was -$462M (low end of planned range) due to timing of incentives and program receipts/disbursements; cash from operations was -$395M .
    • CVN 80 progress impacted by late major equipment deliveries; Ingalls amphib programs pressured margins; Q2 shipbuilding margins guided near low end (conservatism) .
    • Analyst concerns about Ingalls margin trajectory and positive EACs; management acknowledged neutral EACs (80 up/80 down net zero) and experience/parts drag post-COVID .

Financial Results

MetricQ1 2024Q4 2024Q1 2025
Revenue ($USD Billions)$2.805 $3.004 $2.734
Diluted EPS ($)$3.87 $3.15 $3.79
Operating Margin %5.5% 3.7% 5.9%
Net Earnings ($USD Millions)$153 $123 $149
Cash from Operations ($USD Millions)$(202) $391 $(395)
Capital Expenditure ($USD Millions)$75 $114 $67
Free Cash Flow ($USD Millions)$(274) $277 $(462)

Segment Breakdown – Ingalls Shipbuilding

MetricQ1 2024Q4 2024Q1 2025
Revenue ($USD Millions)$655 $736 $637
Segment Operating Income ($USD Millions)$60 $46 $46
Segment Operating Margin %9.2% 6.3% 7.2%

Segment Breakdown – Newport News Shipbuilding

MetricQ1 2024Q4 2024Q1 2025
Revenue ($USD Millions)$1,434 $1,588 $1,396
Segment Operating Income ($USD Millions)$82 $38 $85
Segment Operating Margin %5.7% 2.4% 6.1%

Segment Breakdown – Mission Technologies

MetricQ1 2024Q4 2024Q1 2025
Revenue ($USD Millions)$750 $713 $735
Segment Operating Income ($USD Millions)$28 $19 $40
Segment Operating Margin %3.7% 2.7% 5.4%

KPIs

KPIQ3 2024Q4 2024Q1 2025
Backlog ($USD Billions)$49.4 $48.7 $48.0
New Contract Awards ($USD Billions)$3.6 —$2.1
Cash Balance ($USD Millions)$10 $831 $167
Dividend per Share ($)$1.30 $1.35 $1.35

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Shipbuilding RevenueFY25$8.9–$9.1B $8.9–$9.1B Maintained
Shipbuilding Operating MarginFY255.5%–6.5% 5.5%–6.5% Maintained
Mission Technologies RevenueFY25$2.9–$3.1B $2.9–$3.1B Maintained
Mission Technologies Segment Operating MarginFY254.0%–4.5% 4.0%–4.5% Maintained
Mission Technologies EBITDA MarginFY258.0%–8.5% 8.0%–8.5% Maintained
Free Cash FlowFY25$300–$500M $300–$500M Maintained
Operating FAS/CAS AdjustmentFY25($43M) ($43M) Maintained
Interest ExpenseFY25($130M) ($130M) Maintained
Non-operating Retirement BenefitFY25$191M $191M Maintained
Effective Tax RateFY25~21% ~21% Maintained
D&AFY25~$340M ~$340M Maintained
CapexFY25~4% of Sales ~4% of Sales Maintained
Shipbuilding RevenueQ2 2025—~$2.2B New quarterly color
Shipbuilding MarginQ2 2025—Near low end of annual range New quarterly color
Mission Tech MarginQ2 2025—3.0%–3.5% New quarterly color
Free Cash FlowQ2 2025—$200–$300M New quarterly color
DividendQ1 2025—$1.35/share paid ($53M total) Confirmed

Earnings Call Themes & Trends

TopicQ3 2024 (Q-2)Q4 2024 (Q-1)Q1 2025 (Current)Trend
Contracting & AwardsUncertainty on timing/structure for Block V/VI & Columbia; withdrew 5-year FCF outlook Focus on putting >$50B under contract; backlog $48.7B FY’24 2-boat Block V contract awarded; cost-type hybrid (CPIF); wage/parts support Improving visibility
Throughput & OutsourcingPerformance gaps from late materials and experience loss; plan to stabilize Continued work on pre-COVID contracts; key deliveries Targeting 20% throughput improvement; increased outsourcing with quality pilots; Charleston facility online Ramping execution
Margins & EACsNNS unfavorable cumulative adjustments (-$78M) NNS margin soft; MT margin lower QoQ Q1 shipbuilding margin > guide; EACs net neutral (80 up/80 down); Q2 margins guided conservative Stabilizing with caution
Workforce & WagesPost-COVID experience shortages discussed Hiring focus implied YE commentary Hired ~1,000 experienced craft; attrition improving; wage support contemplated via new contract Improving workforce
Technology & AI/AutonomyMT book-to-bill strong; REMUS deliveries CEW&S growth; UUV sales AI pilots in shipyards; laser counter-UAS program; Lionfish UUVs delivered Expanding tech wins
Tariffs/Macro——Minimal tariff impact expected; domestic sourcing & LT agreements Benign
International Partnerships——MOU with HD Hyundai to accelerate ship production; best-practices exchange Strategic optionality

Management Commentary

  • “First quarter revenue was $2.7 billion and earnings per share was $3.79. We ended the first quarter with backlog of $48 billion, of which approximately $28 billion is currently funded.”
  • “Plans are in place, and we intend to reach our goal of $250 million in annualized cost reduction by year's end.”
  • “Newport News is modestly behind plan… CVN 80… late major equipment… Once this equipment is received… we anticipate an acceleration of progress.”
  • “We guided 5.5% for the quarter… landed about 90 bps above… EAC adjustments: 80 up and 80 down for a net of 0.”
  • “We expect second quarter free cash flow to be between $200 million and $300 million.”

Q&A Highlights

  • Contract type shift: FY’24 2-boat Block V is cost-type (CPIF) designed for affordability/profitability and workforce/equipment/facility investments; forms basis for Block VI & Columbia Build II, but future contract types will be situation-specific .
  • Margins outlook: Q1 shipbuilding margin exceeded guide; Q2 guided conservatively given incentive timing and risk burn-down; MT Q1 performance strong (CEW & uncrewed) .
  • Workforce/attrition: ~1,000 experienced craft hires; attrition improving though not back to pre-COVID; wage support implementation pending labor discussions .
  • Outsourcing quality and schedule: On track at both yards with pilot-first approach; lessons learned from early 2000s applied; quality looks good .
  • Ingalls margin/EACs: Neutral EACs driven by people/parts constraints and experience mix; expectation to “turn the corner,” but no timeframe given .

Estimates Context

Q1 2025 vs Wall Street Consensus (S&P Global)

MetricConsensusActualBeat/Miss
EPS ($)2.88*3.79 Beat
Revenue ($USD Billions)2.786*2.734 Slight miss
EBITDA ($USD Millions)210*275*Beat

Note: Values retrieved from S&P Global.*
Implications: Strong EPS/EBITDA beats despite revenue softness suggest estimate revisions to margins/EBITDA for FY25/Q2–Q3; unchanged FY25 guide and conservative Q2 margin commentary may temper top-line revisions .

Key Takeaways for Investors

  • Execution turning: Q1 margin beat and neutral EACs indicate stabilization; conservative Q2 guide suggests prudence as throughput initiatives ramp .
  • Contract structure supports ramp: Cost-type Block V award provides wage and capital incentives to accelerate submarine build rates; supports medium-term upside to shipbuilding growth .
  • Mission Technologies delivering: Margin expansion and multiple awards in CEW&S and training underpin FY25 MT targets and diversification beyond shipbuilding .
  • Backlog durability: $48B backlog with >$50B targeted awards in 2025–26 positions HII for multi-year growth once post-COVID transitions complete .
  • Working capital normalization path: Q1 FCF negative at planned low end; management reiterates FY25 FCF $300–$500M and Q2 FCF $200–$300M as incentives/receipts timing improves .
  • Operational catalysts: HD Hyundai MOU, outsourcing ramp, Charleston capacity, and AI/laser/UUV programs are tangible enablers for throughput and margin normalization .
  • Risk watch: CVN 80 equipment timing, amphib program performance, and incentive timing remain near-term variables; management tone confident but cautious .

Additional Notes and Cross-References

  • Non-GAAP measures referenced (segment operating income/margin, shipbuilding revenue/margin, MT EBITDA/margin, FCF) are defined and reconciled in the 8-K exhibits .
  • Q1 achievements include launching DDG 129, christening LPD 30, starting LPD 32 fabrication; Kennedy (CVN 79) 95% compartments turnover; Lionfish UUV deliveries .
  • Minimal tariff impact expected due to domestic sourcing and LT agreements .