HII — Third Quarter 2026 Earnings Summary

Financial Performance:

• Third quarter 2026 revenues reached $3.5 billion, a 10.8% increase from $3.192 billion in the third quarter of 2025.
• Operating income was $246 million in Q3 2026, up 52.8% from $161 million in Q3 2025; operating margin improved to 7.0% from 5.0%.
• Segment operating income was $262 million in Q3 2026, up 46.4% from $179 million in Q3 2025; segment operating margin was 7.4% compared to 5.6%.
• Net earnings were $217 million in Q3 2026, a 49.7% increase from $145 million in Q3 2025.
• Diluted earnings per share were $5.48 in Q3 2026, up 48.9% from $3.68 in Q3 2025.
• Net cash provided by operating activities was $520 million in Q3 2026, compared to $118 million in Q3 2025.
• Free cash flow was $429 million in Q3 2026, compared to $16 million in Q3 2025.
• Nine-month 2026 revenues were $10.054 billion, up 11.6% from $9.008 billion in the same period in 2025.
• Nine-month 2026 net earnings were $574 million, up 28.7% from $446 million in the same period in 2025.
• Nine-month 2026 diluted earnings per share were $14.53, up 28.0% from $11.35 in the same period in 2025.
• Long-term debt was $2.704 billion as of September 30, 2026, compared to $2.700 billion as of December 31, 2025.

Guidance and Future Outlook:

• Raised FY26 shipbuilding revenue guidance range to $10.5 billion–$10.7 billion (previously $10.2 billion–$10.4 billion).
• Reaffirmed FY26 shipbuilding operating margin guidance range of 6.0%–6.5%.
• Reaffirmed FY26 free cash flow outlook of $500 million–$600 million.
• Set cumulative FY26 and FY27 free cash flow target between $1.2 billion and $1.3 billion.
• FY26 Mission Technologies revenue guidance remains $3.0 billion–$3.2 billion.
• FY26 Mission Technologies segment operating margin guidance is approximately 6% (up from ~5%).
• FY26 Mission Technologies EBITDA margin guidance is approximately 9% (up from 8.4%–8.6%).
• FY26 operating FAS/CAS adjustment guidance is ($40 million), improved from ($44 million).
• FY26 non-current state income tax expense guidance is ($27 million), compared to ~($20 million).
• FY26 interest expense guidance is ($100 million), compared to ($105 million).
• FY26 capital expenditures guidance is approximately $500 million (previously 4%–5% of sales).

Business Segments and Product Lines:

• Ingalls Shipbuilding: Revenues were $876 million (up 5.8% YoY); segment operating income was $59 million (down 9.2% YoY); segment operating margin was 6.7% (down 112 bps YoY). Growth driven by higher amphibious assault ship volumes; operating income decline driven by lower surface combatant performance.
• Newport News Shipbuilding: Revenues were $1.91 billion (up 18.1% YoY); segment operating income was $132 million (up 65.0% YoY); segment operating margin was 6.9% (up 196 bps YoY). Growth driven by higher submarine and aircraft carrier volumes and contract adjustments/incentives in the Virginia-class submarine program.
• Mission Technologies: Revenues were $792 million (up 0.6% YoY); segment operating income was $71 million (up 108.8% YoY); segment operating margin was 9.0% (up 464 bps YoY). Growth driven by higher Unmanned Systems volumes and equity income from nuclear/environmental joint ventures, partially offset by lower Global Security volumes.
• New Contract Awards: Third quarter 2026 awards totaled $32.4 billion; year-to-date awards totaled $43.1 billion.
• Key Milestones:
  • Ingalls: Christened DDG 131; expanded distributed shipbuilding to amphibious ships; signed agreements with Path Robotics and GrayMatter Robotics; launched automated welding pilot with HD Hyundai.
  • Newport News: Awarded contracts for Block VI Virginia-class and Build II Columbia-class submarines; achieved preliminary acceptance of CVN 79; awarded long-lead materials contract for CVN 82.
  • Mission Technologies: Achieved 2.4x book-to-bill; awarded 10 ROMULUS USVs; awarded option year for Lionfish SUUV; awarded $2.2 billion surveillance contract; expanded unmanned production facility by 25%.

Market and Competitive Landscape:

• Awards received during the quarter secured approximately 90% of expected shipbuilding revenue through 2030.
• HII is described as America's Seapower Company and the nation's largest shipbuilder.
• Company focuses on manned and unmanned maritime systems and all-domain mission technologies.

Risks and Challenges:

• Dependence on the U.S. Government for substantially all business.
• Potential delays or reductions in government appropriations, changes in customer priorities, and government budgetary constraints.
• Inflation, labor challenges, and trade policy changes affecting contract cost estimation.
• Workforce attraction, retention, and training challenges.
• Subcontractor and supplier performance, and raw material availability/pricing.
• Legal proceedings, investigations, and compliance with changing government regulations.
• Pension and retiree health care cost estimate variability.
• Cyber security threats, natural disasters, and political instability.

Management Commentary and Tone:

• Chris Kastner, President and CEO, stated results reflect solid performance across all three segments.
• Management emphasized that significant awards have secured 90% of shipbuilding revenue through 2030, allowing focus on shipbuilding execution.
• Highlighted continued leadership in unmanned systems and maritime autonomy with landmark awards for MUSV and Lionfish SUUV.

Other Key Points:

• Dividends declared per share were $1.38 in Q3 2026, up from $1.35 in Q3 2025.
• HII employs 46,000 people across three divisions.
• Contract assets increased to $2.125 billion as of September 30, 2026, from $1.758 billion as of December 31, 2025.
• Contract liabilities decreased to $780 million as of September 30, 2026, from $1.220 billion as of December 31, 2025.
• Cash and cash equivalents were $387 million as of September 30, 2026, down from $774 million as of December 31, 2025.
• Nine-month 2026 capital expenditures were $288 million.
• Nine-month 2026 dividends paid were $163 million.