Huntington Ingalls Industries, Inc. (HII) - Q1 2026 Filing Summary
Business Context and Reporting Period
This summary covers the unaudited quarterly report (Form 10-Q) for Huntington Ingalls Industries, Inc. for the period ended March 31, 2026. HII is the largest U.S. naval shipbuilder, operating through three segments: Ingalls Shipbuilding, Newport News Shipbuilding, and Mission Technologies. The company primarily serves the U.S. Government, with a focus on naval ship design, construction, and repair, as well as defense technology solutions.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Sales and Service Revenues | $3,099 million | $2,734 million |
| Operating Income | $155 million | $161 million |
| Net Earnings | $149 million | $149 million |
| Diluted EPS | $3.79 | $3.79 |
| Operating Cash Flow | ($390 million) used | ($395 million) used |
| Free Cash Flow | ($461 million) used | ($462 million) used |
| Cash and Equivalents (End of Period) | $216 million | $167 million |
| Long-Term Debt | $2,701 million | $2,700 million |
| Total Backlog | $54.0 billion | $53.1 billion (Dec 2025) |
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 13% ($365 million) year-over-year, driven by higher volumes across all segments, particularly in aircraft carriers and submarines at Newport News and surface combatants at Ingalls.
- Operating Income Decline: Despite revenue growth, operating income decreased 4% ($6 million) to $155 million. This was primarily due to an $8 million increase in non-current state income tax expense and lower performance in certain aircraft carrier construction programs.
- Segment Performance:
- Ingalls: Revenue up 14%; Operating income up 7% ($49 million) due to higher surface combatant volumes.
- Newport News: Revenue up 19%; Operating income up 4% ($88 million) driven by aircraft carrier and submarine volumes, partially offset by contract adjustments.
- Mission Technologies: Revenue up 2%; Operating income down 13% ($35 million) due to lower equity income from joint ventures.
- Liquidity: Cash and cash equivalents decreased significantly from $774 million at year-end 2025 to $216 million at March 31, 2026, reflecting a $558 million net decrease in cash driven by operating and financing activities.
Guidance, Outlook, and Risks
- Backlog: Total backlog stands at $54.0 billion, with approximately 40% expected to be recognized as revenue through 2027. New contract awards in Q1 2026 totaled approximately $4.0 billion.
- Capital Expenditures: Expected to be 1.0% to 1.5% of annual revenues for maintenance and 3.0% to 3.5% for discretionary spending in 2026, with increases anticipated for shipbuilding capacity expansion.
- Dividends: The company declared a quarterly dividend of $1.38 per share, an increase from $1.35 in the prior year.
- Risks and Contingencies:
- Legal Proceedings: The company reached an agreement to resolve a class action antitrust lawsuit regarding naval engineer recruitment; the liability recorded is not material. An ongoing insurance claim regarding COVID-19 business interruption remains pending.
- Government Investigations: The company is cooperating with the U.S. Government regarding quality issues involving noncompliance with welding procedures at Newport News identified in 2024; the ultimate outcome is currently unpredictable.
- Geopolitical and Economic: Management cites uncertainty in defense spending, inflationary pressures on supply chains, and labor market challenges as key risks.
Investor Verification Checklist
- Verify the impact of the non-current state income tax expense ($8 million) on future quarters and its relation to deferred tax assets/liabilities.
- Monitor the resolution of the Newport News welding procedure quality issues and potential financial impact on contract margins.
- Assess the sustainability of cash burn in operating activities ($390 million used) given the significant drawdown in cash reserves from $774 million to $216 million.
- Review the backlog conversion rate to ensure the $54 billion backlog translates into revenue as projected, particularly for the Columbia class and Virginia class submarine programs.
- Confirm the status of the antitrust settlement and any potential precedents for future litigation.