Huntington Ingalls Industries
HII
$326.45
+2.05%
Huntington Ingalls Industries (HII) is the largest independent military shipbuilder in the United States, operating through three segments: Ingalls Shipbuilding (non-nuclear ships like amphibious vessels and destroyers), Newport News Shipbuilding (nuclear-powered aircraft carriers and submarines), and Mission Technologies (uncrewed systems and IT services). As a dominant player in naval defense, HII holds a near-monopoly on Ford-class carriers and is a key subcontractor for Virginia- and Columbia-class submarines, making it strategically vital to U.S. national security. The current investor narrative centers on a potential surge in naval procurement, driven by proposed defense budget increases and geopolitical tensions, which could significantly boost HII's backlog and revenue growth. However, the stock has faced volatility due to concerns about supply chain disruptions, labor shortages, and the emergence of autonomous vessel startups, creating a debate between long-term tailwinds and near-term operational challenges.…
HII
Huntington Ingalls Industries
$326.45
Related headlines
Investment Opinion: Should I buy HII Today?
We rate HII a Buy. The stock offers a compelling risk-reward with a forward PE of 15.98x, a 10.3% upside to the average analyst target of $360.09, and a consensus Buy rating. The thesis is that HII's dominant position in nuclear shipbuilding and the accelerating naval procurement cycle will drive earnings growth, justifying the current valuation.
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HII 12-Month Price Forecast
The AI assessment is bullish on HII, driven by its accelerating revenue growth, attractive valuation relative to peers, and strong analyst support. The low beta adds a defensive quality that is appealing in uncertain markets. However, the medium confidence reflects the risks of margin compression and competitive disruption. The stance would be upgraded to high confidence if HII reports sustained double-digit revenue growth and improved free cash flow. Conversely, a downgrade to neutral would occur if revenue growth falls below 10% or if the stock breaks below its 52-week low.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Huntington Ingalls Industries's 12-month outlook, with a consensus price target around $362.75 and implied upside of +11.1% versus the current price.
Average Target
$362.75
0 analysts
Implied Upside
+11.1%
vs. current price
Analyst Count
—
covering this stock
Price Range
$280 - $431
Analyst target range
HII is covered by 11 analysts, with a consensus recommendation of 'Buy' and a mean rating of 2.25 (where 1 is Strong Buy and 5 is Sell). The average target price is $360.09, implying an upside of 10.3% from the current price of $326.45. The target range spans from $280.00 (low) to $431.00 (high), indicating a wide dispersion in expectations, which reflects uncertainty about the pace of naval procurement and potential margin pressures. Recent ratings have been predominantly positive, with TD Cowen and Citigroup reiterating Buy ratings in July 2026, and B of A Securities upgrading from Underperform to Neutral in February 2026. The high target of $431 suggests optimism about long-term defense spending, while the low target of $280 implies concerns about execution risks or budget cuts. Overall, the analyst community is cautiously bullish, with a clear upside bias.
Bulls vs Bears: HII Investment Factors
HII presents a classic value-versus-momentum dilemma. The bull case rests on accelerating revenue growth, a discounted forward valuation, and a once-in-a-generation naval buildup, while the bear case highlights persistent price weakness, margin erosion, and emerging competitive threats. Currently, the evidence slightly favors the bulls given the strong backlog and analyst support, but the stock's negative relative strength and operational cash flow volatility temper enthusiasm. The pivotal tension is whether HII can convert its record backlog into improved margins and free cash flow, which would justify a re-rating, or whether execution issues and budget uncertainties continue to weigh on the stock.
Bullish
- Revenue Growth Accelerating: Q1 2026 revenue surged 13.35% YoY to $3.099B, the highest growth in recent quarters, driven by all three segments. This acceleration supports the thesis of a naval procurement supercycle.
- Undervalued on Forward PE: Forward PE of 15.98x is a 20-36% discount to the aerospace & defense sector average of 20-25x. This suggests the market is pricing in lower growth than peers, offering a margin of safety.
- Strong Backlog Visibility: As the sole builder of Ford-class carriers and a key subcontractor for Virginia- and Columbia-class submarines, HII has multi-year visibility. The proposed $1.5T Pentagon budget and 355-ship Navy goal provide a durable demand backdrop.
- Analyst Consensus Buy: 11 analysts rate HII a Buy with a mean rating of 2.25 and an average target of $360.09, implying 10.3% upside. Recent reiterations from TD Cowen and Citigroup in July 2026 reinforce positive sentiment.
Bearish
- Sharp Price Decline and Underperformance: HII is down 22.37% over the past 6 months and 17.07% over the past year, while the S&P 500 gained 18.19% over the same period. Relative strength is deeply negative, indicating persistent selling pressure.
- Negative Free Cash Flow in Q1: Q1 2026 FCF was -$464M due to working capital outflows, a common but concerning pattern for defense contractors. This could pressure liquidity if sustained, despite a TTM FCF of $1.06B.
- Margin Pressure from Cost-Plus Contracts: Gross margin fell to 13.17% in Q1 2026 from 14.41% a year earlier, and operating margin remains around 5%. Cost overruns and labor shortages could further compress margins.
- Disruption from Autonomous Vessels: Private startups like Saronic are attracting massive funding for robotic warships, and the Navy's pivot to faster, cheaper autonomous vessels could erode HII's traditional shipbuilding dominance over time.
HII Technical Analysis
HII's price trend over the past year has been characterized by a significant decline, with the stock down 17.07% over the past year, despite a recent sharp rebound. The current price of $326.45 sits at 71% of its 52-week range (between $259.00 and $460.00), indicating it is closer to the lows than the highs, which suggests a potential value opportunity but also reflects persistent selling pressure. The stock's beta of 0.248 indicates it is significantly less volatile than the market, which may appeal to risk-averse investors but also means it may underperform in strong bull markets.
Beta
0.25
0.25x market volatility
Max Drawdown
-40.8%
Largest decline past year
52-Week Range
$259-$460
Price range past year
Annual Return
+17.1%
Cumulative gain past year
| Period | HII Return | S&P 500 |
|---|---|---|
| 1m | +17.0% | +0.3% |
| 3m | -9.5% | +4.0% |
| 6m | -22.4% | +8.3% |
| 1y | +17.1% | +20.2% |
| ytd | -6.7% | +9.6% |
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HII Fundamental Analysis
HII's revenue has shown strong growth, with the most recent quarter (Q1 2026) reporting revenue of $3.099 billion, up 13.35% year-over-year, and the trailing twelve-month revenue is estimated at $16.08 billion. This growth is driven by all three segments, with Newport News Shipbuilding contributing the largest share at $1.665 billion, followed by Mission Technologies at $748 million and Ingalls at $725 million. The company's profitability remains solid, with a net income of $149 million in Q1 2026, translating to a net margin of 4.81%, and a gross margin of 13.17%, which is consistent with the defense industry's typical margins. However, operating margins have been relatively stable around 5%, reflecting the cost-plus nature of government contracts. HII's balance sheet appears manageable, with a debt-to-equity ratio of 0.62 and a current ratio of 1.13, indicating adequate liquidity. Free cash flow for the trailing twelve months was $1.06 billion, but Q1 2026 saw a negative free cash flow of -$464 million due to significant working capital outflows, which is typical for defense contractors with large contract milestones. The company's ROE of 11.93% and ROA of 4.28% demonstrate efficient use of equity and assets, though the negative operating cash flow in Q1 raises some concerns about short-term cash generation.
Quarterly Revenue
$3.1B
2026-03
Revenue YoY Growth
+13.4%
YoY Comparison
Gross Margin
13.2%
Latest Quarter
Free Cash Flow
$1.1B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is HII Overvalued?
Given HII's positive net income, the PE ratio is the most appropriate valuation metric. The trailing PE is 22.10x, while the forward PE is 15.98x, indicating that the market expects earnings growth, which is supported by the estimated EPS of $27.39 for the next fiscal year. Compared to the industry average, HII's forward PE of 15.98x is at a discount to the broader aerospace & defense sector, which typically trades at 20-25x, suggesting the stock is undervalued relative to peers. Historically, HII's PE has ranged from around 9x to 25x over the past few years, with the current trailing PE of 22.10x near the higher end, but the forward PE suggests a more reasonable valuation. The PS ratio of 1.07x is also below the sector average, further supporting the case for undervaluation.
PE
22.1x
Latest Quarter
vs. Historical
High-End
5-Year PE Range 9x~25x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
13.0x
Enterprise Value Multiple
Investment Risk Disclosure
Financial risks are moderate but notable. HII's debt-to-equity ratio of 0.62 is manageable, but the negative free cash flow of -$464M in Q1 2026 signals working capital strain, which could recur given the lumpy nature of defense contracts. The net margin of 4.81% is thin, leaving little room for cost overruns. Revenue concentration in U.S. Navy programs (carriers, submarines) means any budget cut or program delay would directly hit earnings. The current ratio of 1.13 provides only a slim liquidity buffer, and the payout ratio of 35% suggests dividends are covered but not robustly.
FAQ
The key risks are: (1) Financial: Negative free cash flow in Q1 2026 (-$464M) and thin net margins (4.81%) could pressure liquidity. (2) Competitive: Autonomous vessel startups like Saronic could disrupt traditional shipbuilding. (3) Macro: Defense budget cuts or geopolitical de-escalation could reduce demand. (4) Company-specific: Cost overruns on submarine programs could hurt earnings. The most severe risk is a combination of budget cuts and execution failures, which could drive the stock to $259, a 20% downside.
The 12-month forecast is moderately bullish. The base case (50% probability) targets $340-$370, aligning with the analyst average of $360.09. The bull case (30% probability) targets $380-$431, driven by defense budget increases. The bear case (20% probability) targets $259-$280, if budget cuts or disruptions occur. The most likely scenario is the base case, assuming steady growth and stable margins.
HII appears undervalued based on forward metrics. The forward PE of 15.98x is below the sector average of 20-25x, and the PS ratio of 1.07x is also below the sector. However, the trailing PE of 22.10x is near the higher end of its historical range, suggesting the market expects strong growth. The valuation implies that investors are pricing in moderate growth, but not a supercycle. If HII delivers on its growth potential, the stock could re-rate higher.
HII is a good buy for investors with a long-term horizon who are comfortable with moderate risk. The stock offers a 10.3% upside to the average analyst target of $360.09, and its forward PE of 15.98x is a discount to the sector average of 20-25x. The main downside risk is a potential 20% decline to the 52-week low of $259 if execution falters. Given the strong backlog and defense spending tailwinds, the risk-reward is favorable, but investors should be prepared for volatility.
HII is best suited for long-term investment (3-5 years or more) due to its multi-year backlog and strategic importance. The stock's low beta (0.248) makes it less volatile, but it may underperform in strong bull markets. Short-term trading is possible given the recent volatility, but the stock's fundamental drivers are long-term in nature. A minimum holding period of 3 years is recommended to capture the full benefit of the naval procurement cycle.