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HUNTINGTON INGALLS INDUSTRIES, INC. (HII)·Q3 2025 Earnings Summary

Executive Summary

  • Strong quarter: revenue $3.19B (+16.1% YoY), EPS $3.68, operating margin 5.0%; shipbuilding revenue/margin materially improved with Newport News segment margin rising 389 bps YoY to 4.9% .
  • Clear beat vs consensus: revenue beat by ~$0.24B and EPS beat by ~$0.32; EBITDA also above Street; free cash flow guidance raised to $550–$650M for FY25; cumulative FY25–26 FCF set at $1.2B . Estimates marked * are from S&P Global.
  • Operational momentum: 1.25x book-to-bill at Mission Technologies; backlog $55.7B at quarter-end (call referenced $56B and $33B funded) .
  • Catalysts ahead: timing of Block 6 Virginia-class and Columbia-class awards could swing Q4 margins toward/away from midpoint; dividend increased to $1.38 per share .

What Went Well and What Went Wrong

What Went Well

  • Record sales with broad-based growth: “we reported record third quarter sales of $3.2 billion… demand for our products and services remains strong” (CEO) .
  • Shipbuilding throughput initiatives gaining traction (wages, outsourcing, Charleston Operations) delivering above-plan shipbuilding revenue in Q3 (material receipts, outsourcing lift) (CFO) .
  • Mission Technologies momentum: 1.25x book-to-bill; unveiled AI-enabled ROMULUS USV and reached 750th REMUS UUV production; announced Shield AI partnership .

What Went Wrong

  • Free cash flow seasonality and working capital: Q3 free cash flow $16M vs $136M in Q3’24; cash from ops $118M vs $213M YoY as disbursements shifted and collections timing impacted quarter .
  • Mission Technologies margin compression: segment margin 4.3% (-33 bps YoY) on contract mix despite higher volumes; EBITDA margin down to 7.8% from 8.9% YoY .
  • Tax rate headwind: Q3 effective tax rate 28.9% due to reduced R&D credit for prior year; FY25 ETR guidance raised to ~22% (from ~21%) .

Financial Results

Consolidated Performance (chronological: oldest → newest)

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Revenues ($USD Billions)$2.749 $2.734 $3.082 $3.192
Operating Income ($USD Millions)$82 $161 $163 $161
Operating Margin (%)3.0% 5.9% 5.3% 5.0%
Net Earnings ($USD Millions)$101 $149 $152 $145
Diluted EPS ($USD)$2.56 $3.79 $3.86 $3.68

Segment Breakdown (Q3 2024 vs Q3 2025)

SegmentRevenue ($USD Millions) Q3 2024Revenue ($USD Millions) Q3 2025Segment Op Income ($USD Millions) Q3 2024Segment Op Income ($USD Millions) Q3 2025Segment Margin (%) Q3 2024Segment Margin (%) Q3 2025
Ingalls Shipbuilding$664 $828 $49 $65 7.4% 7.9%
Newport News Shipbuilding$1,412 $1,617 $15 $80 1.1% 4.9%
Mission Technologies$709 $787 $33 $34 4.7% 4.3%

Additional non-GAAP: Shipbuilding revenue $2,076 → $2,445; shipbuilding operating income $64 → $145; shipbuilding margin 3.1% → 5.9% (Q3 2024 → Q3 2025) .

Actual vs Wall Street Consensus (S&P Global) – Q1 to Q3 2025

MetricQ1 2025 Consensus*Q1 2025 ActualQ2 2025 Consensus*Q2 2025 ActualQ3 2025 Consensus*Q3 2025 Actual
Revenue ($USD Billions)$2.786*$2.734 $2.934*$3.082 $2.948*$3.192
EPS ($USD)$2.88*$3.79 $3.30*$3.86 $3.36*$3.68
EBITDA ($USD Billions)$0.210*$0.275 $0.230*$0.285 $0.226*$0.277

Values retrieved from S&P Global.

KPIs and Cash Metrics (chronological: Q1 → Q2 → Q3 2025)

KPIQ1 2025Q2 2025Q3 2025
New Contract Awards ($USD Billions)$2.1 $11.9 $2.0
Backlog ($USD Billions)$48.0 $56.9 $55.7
Cash from Operations ($USD Millions)$(395) $823 $118
Free Cash Flow ($USD Millions)$(462) $730 $16
Cash Balance ($USD Millions)$167 $343 $312
Liquidity ($USD Billions)$1.5 $2.0 $2.0
Mission Tech Book-to-Bill (x)——1.25

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Shipbuilding RevenueFY25$8.9B–$9.1B $9.0B–$9.1B Raised lower bound
Shipbuilding Operating MarginFY255.5%–6.5% 5.5%–6.5% Maintained
Mission Technologies RevenueFY25$2.9B–$3.1B $3.0B–$3.1B Raised lower bound
Mission Tech Segment Op MarginFY254.0%–4.5% ~4.5% Raised to ~4.5%
Mission Tech EBITDA MarginFY258.0%–8.5% 8.0%–8.5% Maintained
Operating FAS/CAS AdjustmentFY25($40M) ($35M) Improved
Effective Tax RateFY25~21% ~22% Raised
Free Cash FlowFY25$500M–$600M $550M–$650M Raised $50M midpoint
Cumulative Free Cash FlowFY25–FY26—$1.2B target New target
Dividend per ShareNext Payable$1.35 $1.38 Raised $0.03

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Throughput & WorkforceTargeting ~20% throughput; acquired Charleston site; workforce initiatives Revised ~15% throughput improvement for FY25; >4,600 shipbuilders hired YTD; retention improving; 23 outsourcing partners Improving, moderated target
AI/Technology InitiativesStrategic partnership with C3 AI to accelerate shipbuilding ROMULUS USV unveiled; post-Q3, Shield AI Hivemind integrated on ROMULUS 20 (first maritime deployment) Accelerating deployments
Supply Chain & OutsourcingRamp outsourcing, distributed shipbuilding MOU with HD Hyundai to collaborate on distributed shipbuilding; outsourcing scaled to 23 partners Scaling partnerships
Budget/Appropriations—Lapse in appropriations; shipbuilding supported; immaterial Mission Tech impact; monitoring FY26 appropriations Macro risk observed
Contract Awards$11.9B Q2 awards; backlog record Working towards Virginia Block 6 & Columbia awards in late 2025; timing could sway margins Near-term catalyst
MarginsNNS margin down in Q2; Ingalls steady NNS margin up to 4.9% (from 1.1% YoY); shipbuilding margin 5.9% Stabilizing/up
Unmanned SystemsLionfish, REMUS orders; forward-deployed UUV ops ROMULUS family progress; 750th REMUS; Navy training contract Expanding

Management Commentary

  • “We reported record third quarter sales of $3.2 billion and diluted earnings per share of $3.68… Demand for our products and services remains strong.” — Chris Kastner, CEO .
  • “Shipbuilding revenue was well ahead of our guidance for the quarter… supported by wages, higher material receipts, and increased outsourcing.” — Tom Stiehle, CFO .
  • “If the submarine award were to push into 2026, it would be a headwind to our guidance… likely ending slightly below the midpoint; an award this year would support ending at or slightly above.” — Tom Stiehle .
  • “4% midterm growth is probably in the rearview mirror… it’s probably in excess of that.” — Chris Kastner (regarding shipbuilding midterm growth) .

Q&A Highlights

  • Award timing and margin sensitivity: Management reiterated margin range, noting performance incentives tied to submarine awards could affect Q4 positioning around the midpoint .
  • Throughput improvement distribution: ~15% improvement target for FY25 is roughly equal across Ingalls and Newport News; wage increases aiding retention and experience mix at Newport News .
  • EACs detail: Net EAC in Q3 was -$3M (gross favorable $37M, unfavorable $40M), with Ingalls +$6M, Newport News -$13M, Mission Tech +$4M .
  • Autonomy strategy: Open-architecture Odyssey enables rapid integration with partners (Shield AI, C3 AI); first maritime deployment of Hivemind on ROMULUS 20 validates approach .
  • Tax and cash outlook: Q3 ETR elevated (28.9%) from R&D credit reduction; FY25 ETR guided to ~22%. Two-year FCF run-rate guided ~$600M/year across 2025–2026, subject to timing of awards/receipts .

Estimates Context

  • Q3 2025 beat: Revenue $3.192B vs $2.948B*; EPS $3.68 vs $3.36*; EBITDA $277M vs $226M* — broad-based beat across metrics. Values retrieved from S&P Global.
  • Q2 2025 beat: Revenue $3.082B vs $2.934B*; EPS $3.86 vs $3.30*; EBITDA $285M vs $230M*. Values retrieved from S&P Global.
  • Q1 2025 mixed: Revenue $2.734B vs $2.786B* (miss); EPS $3.79 vs $2.88* (beat); EBITDA $275M vs $210M*. Values retrieved from S&P Global.
  • FY25 Street context: EPS ~$15.17*; revenue ~$12.08B* vs company outlook implying shipbuilding $9.0–$9.1B and Mission Tech $3.0–$3.1B plus eliminations .

Key Takeaways for Investors

  • Near-term: Strong revenue/EPS beat and raised FCF guidance should support positive sentiment; watch submarine award timing into year-end as a key swing factor for Q4 margins .
  • Shipbuilding inflection: Material improvement in shipbuilding margin (5.9%) and Newport News margin recovery signal progress on post-COVID contracts and throughput execution .
  • Mission Technologies: Solid growth and pipeline (1.25x B2B), but margin mix pressure persists; continued autonomy rollouts (ROMULUS, Shield AI) offer strategic upside .
  • Cash and capital returns: Cash balance $312M, ~$2B liquidity; dividend raised to $1.38; FCF trajectory ~$600M/year through 2026 underpins buyback potential post-operations stabilization .
  • Macro/budget: Lapse in appropriations currently immaterial to shipbuilding, but Mission Tech more exposed; monitor FY26 appropriations process .
  • Estimate revisions: Expect upward revisions to revenue/EPS/EBITDA for Q4/FY on evidence of throughput and outsourcing gains, tempered by ETR uplift and Mission Tech margin mix. Values retrieved from S&P Global.
  • Medium-term thesis: Management implies midterm shipbuilding growth above prior ~4% guide, contingent on continued industrial base rebuilding, labor maturation, and award cadence .