Huntington Ingalls Industries
HII
$272.86
-1.54%
Huntington Ingalls Industries (HII) is the largest independent military shipbuilder in the United States, operating three segments: Ingalls Shipbuilding (non-nuclear surface combatants such as Arleigh Burke-class destroyers and amphibious assault ships), Newport News Shipbuilding (the sole producer of Gerald Ford-class aircraft carriers and a major subcontractor on Virginia- and Columbia-class nuclear submarines), and Mission Technologies (uncrewed vessels, IT, and government services). Spun out of Northrop Grumman in 2011, HII occupies a uniquely entrenched position in the U.S. naval industrial base, sharing destroyer production with General Dynamics' Bath Iron Works and submarine work with Electric Boat, giving it near-oligopolistic exposure to a multi-decade shipbuilding backlog. The current investor narrative is dominated by the prospect of a historic naval procurement supercycle — headlines reference a proposed $1.5 trillion Pentagon budget and a push toward a 355-ship Navy — which management validated with a strong Q1 2026 earnings beat and raised guidance in early August. Against that bullish demand backdrop, the stock has nonetheless been a notable laggard, with shares down sharply over six months as investors weigh execution risk at the shipyards, working-capital volatility, and competitive threats from private autonomous-vessel upstarts like Saronic against the durability of HII's franchise programs.…
HII
Huntington Ingalls Industries
$272.86
Related headlines
Investment Opinion: Should I buy HII Today?
Rating: Hold with a contrarian lean toward accumulation on weakness. The core thesis is that HII's forward valuation (13.42x PE) and analyst consensus target of $368.42 (+31.7% upside) are attractive, but the stock's severe downtrend (-32.72% over six months, just 3.4% above its 52-week low) and persistent negative first-half free cash flow warrant patience until execution improves. The 12-analyst community is constructive with no 2026 downgrades and a BofA upgrade to Neutral, but the wide target range of $304–$439 signals meaningful uncertainty.
Supporting evidence: (1) Forward PE of 13.42x versus a sector that often trades at 18–22x implies a 25–40% discount, anchored to the $28.12 average EPS estimate. (2) Revenue grew 13.35% year-over-year in Q1 2026 to $3.099 billion, with forward revenue estimates of $16.45 billion implying continued growth. (3) TTM free cash flow of $1.06 billion and a 1.59% dividend yield with a conservative 35.2% payout ratio provide income support. (4) The PS ratio of 1.07 is at its cheapest level in available history, well below the 2.46x–4.82x historical range. (5) Analyst average target of $368.42 implies 31.7% upside, with the high target of $439.00 implying 57%.
Key risks that could invalidate the thesis: (1) Gross margin fails to recover above 14%, keeping operating margin below 5% and delaying the EPS rebound implied by the forward PE. (2) First-half free cash flow remains deeply negative, forcing debt issuance or dividend/buyback cuts. (3) Competitive disruption from autonomous-vessel upstarts like Saronic erodes long-term franchise value. The rating would upgrade to Buy if the stock reclaims the $300–$320 zone with improving gross margins, or downgrade to Sell if it breaks below the 52-week low of $263.62 on deteriorating cash flow. Valuation verdict: undervalued relative to history and peers on forward metrics, but fairly valued to slightly expensive on trailing metrics given execution risk.
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HII 12-Month Price Forecast
HII presents a classic value-versus-momentum tension: the forward valuation (13.42x PE, 1.07x PS) and analyst targets (+31.7% upside) are compelling, but the stock's severe downtrend and persistent negative first-half free cash flow signal real execution risk. The bull case rests on a historic naval procurement supercycle and a 13.35% revenue growth acceleration, while the bear case points to thin margins, working-capital volatility, and competitive disruption from autonomous-vessel upstarts. With beta of just 0.225, the -40.77% max drawdown was driven by company-specific factors, meaning the market is pricing in more pessimism than the analyst community. I would upgrade to bullish if the stock reclaims the $300–$320 zone with gross margins above 14% and moderating cash burn, or downgrade to bearish if it breaks below $263.62 on deteriorating fundamentals. At current levels, the risk/reward is balanced but skewed positively for patient, value-oriented investors with a 12–18 month horizon.
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 $368.42 and implied upside of +35.0% versus the current price.
Average Target
$368.42
0 analysts
Implied Upside
+35.0%
vs. current price
Analyst Count
—
covering this stock
Price Range
$304 - $439
Analyst target range
HII is covered by 12 analysts, and the consensus is constructive despite the stock's weakness: the average target price of $368.42 implies +31.7% upside from the current $279.69, a substantial gap that suggests the sell-side views the recent decline as overdone. The recommendation field shows "none" (likely a data gap), but the institutional ratings history is overwhelmingly positive — TD Cowen and Citigroup have maintained Buy ratings through 2026, and BofA Securities upgraded from Underperform to Neutral in February 2026, indicating a broad shift toward a more favorable stance. The consensus leans bullish, with the average target sitting 31.7% above the current price and the forward EPS estimate of $28.12 implying the analyst community expects a sharp earnings recovery.
The target range spans $304.00 to $439.00, a spread of $135 or roughly 44% of the current price, which signals meaningful uncertainty about execution and program timing. The high target of $439.00 — 57% above the current price — likely assumes successful ramp on Columbia-class submarine and Ford-class carrier programs, margin recovery toward historical highs, and multiple expansion back toward the 18-20x forward PE range, while the low target of $304.00 (still 8.7% above current) prices in continued margin compression and working-capital drag but no catastrophic program failure. The recent rating actions show no downgrades in 2026, with upgrades (BofA) and reiterations (Citigroup, TD Cowen, Goldman Sachs) dominating, and the wide spread combined with the stock trading near 52-week lows suggests the market is pricing in far more pessimism than the analyst community — a classic contrarian setup if the company delivers on its raised guidance and the naval procurement supercycle materializes.
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Bulls vs Bears: HII Investment Factors
The bear case currently has stronger near-term evidence: the stock is in a clear downtrend, down 32.72% over six months and sitting just 3.4% above its 52-week low, with severe relative underperformance versus SPY (-48.12 points over six months) that points to company-specific execution and cash-flow concerns rather than macro beta. However, the bull case rests on a compelling valuation disconnect — a forward PE of 13.42x versus a sector that often trades at 18–22x, a PS ratio of 1.07 at historical lows, and analyst targets implying 31.7% upside — supported by a 13.35% revenue growth acceleration and a proposed $1.5 trillion Pentagon budget. The single most important tension is whether HII can convert its massive naval backlog into consistent earnings and free cash flow: if forward EPS of $28.12 materializes, the stock is deeply undervalued; if execution issues and working-capital volatility persist, the low forward PE is a value trap. Resolution likely hinges on the next two quarterly reports, particularly whether gross margins recover above 14% and first-half cash burn moderates.
Bullish
- Deep value on forward earnings: Forward PE of 13.42x is near the low end of HII's historical range (9.4x–25.8x) and represents a 39% compression from the trailing PE of 22.10x, implying the market expects a substantial EPS rebound to the $28.12 consensus estimate. The PS ratio of 1.07 is also at its cheapest level in available history, well below the 2.46x–4.82x range seen over the past several years.
- Analyst targets imply 31.7% upside: The 12-analyst average target of $368.42 sits 31.7% above the current $279.69, with the high target of $439.00 implying 57% upside. No downgrades have occurred in 2026, and BofA upgraded the stock from Underperform to Neutral in February, suggesting the sell-side views the decline as overdone.
- Revenue reaccelerating with raised guidance: Q1 2026 revenue of $3.099 billion grew 13.35% year-over-year, a marked acceleration from the prior-year comparison, and management raised full-year guidance in early August. Analyst estimates of $16.45 billion average forward revenue imply continued mid-single-digit growth supported by a multi-decade naval backlog.
- Historic naval procurement supercycle: A proposed $1.5 trillion Pentagon budget and a push toward a 355-ship Navy create a durable demand tailwind for HII's franchise programs. Newport News is the sole producer of Gerald Ford-class carriers and a major subcontractor on Virginia- and Columbia-class submarines, giving HII near-oligopolistic exposure to the most strategically protected naval programs.
Bearish
- Severe downtrend near 52-week lows: The stock is down 32.72% over six months and 20.03% YTD, sitting just 3.4% above its 52-week low of $263.62 and 39.2% below its 52-week high of $460.00. The -40.77% max drawdown confirms a sustained distribution phase, and the 1-month decline of 14.42% shows selling pressure has accelerated rather than stabilized.
- Massive relative underperformance: HII trails SPY by -48.12 percentage points over six months, -13.36 points over one month, and -9.08 points over three months, while SPY gained 16.22% over the past year versus HII's +1.31%. This persistent underperformance signals company-specific issues rather than broad market weakness, especially given HII's low beta of 0.225.
- Thin margins and volatile profitability: Q1 2026 gross margin of 13.17% remains below the year-ago 14.41%, and the operating margin of 4.87% reflects the low-margin, cost-plus economics of defense shipbuilding. Gross margin has been volatile, ranging from 11.57% in Q4 2025 to 14.41% in Q1 2025, and fixed-price development programs can compress returns further.
- Persistent negative first-half free cash flow: Q1 2026 free cash flow was -$464 million, driven by a -$685 million working-capital swing and -$390 million in operating cash flow, mirroring the -$462 million in Q1 2025. This recurring seasonal pattern forces reliance on the balance sheet or debt markets, with cash falling to $216 million from $774 million at year-end 2025.
HII Technical Analysis
HII is in a clear intermediate-term downtrend despite a marginally positive 1-year return of +1.31%, with the current price of $279.69 sitting just 3.4% above its 52-week low of $263.62 and a striking 39.2% below its 52-week high of $460.00. That places the stock at roughly 8% of its 52-week range — a deeply depressed positioning that typically signals either a capitulation-style value opportunity or a falling knife, and the -40.77% max drawdown confirms the severity of the decline from prior highs. The 6-month change of -32.72% and YTD decline of -20.03% underscore that this is a sustained distribution phase rather than a brief pullback, and the burden of proof now rests on whether the $263.62 low can hold as a durable base.
Short-term momentum remains decisively negative and is diverging bearishly from the longer-term trend: the 1-month change of -14.42% is far worse than the 1-year change of +1.31%, indicating that recent selling pressure has accelerated rather than stabilized. The 3-month change of -6.04% is less severe than the 1-month figure, suggesting the pace of decline actually steepened into September, with the stock falling from roughly $327 in mid-August to $279.69 by September 11. Relative strength metrics confirm broad underperformance: HII trails SPY by -13.36 percentage points over 1 month, -9.08 points over 3 months, and a staggering -48.12 points over 6 months, while SPY itself gained 16.22% over the past year versus HII's +1.31%. Volume of 445,850 shares on the latest session is modest, and with a short ratio of 2.48 days-to-cover, there is no evidence of an imminent short-squeeze catalyst.
Key technical levels are well defined: support rests at the 52-week low of $263.62, roughly 5.7% below the current $279.69, while resistance sits at the 52-week high of $460.00, implying 64.5% upside required to reclaim prior highs — a gap that highlights how much damage has been done. A breakdown below $263.62 would likely trigger momentum-driven selling and open the door to new multi-year lows, whereas a decisive reclaim of the $300-$320 zone (the July consolidation area) would be the first credible sign of a trend reversal. Notably, HII's beta of just 0.225 means the stock moves only about 22.5% as much as the market — extremely low volatility relative to SPY — which cuts both ways: it cushions macro-driven drawdowns but also means the stock's -40.77% max drawdown was driven by company-specific factors rather than broad market beta, and position sizing should reflect that idiosyncratic risk rather than headline volatility.
Beta
0.23
0.23x market volatility
Max Drawdown
-40.8%
Largest decline past year
52-Week Range
$264-$460
Price range past year
Annual Return
-0.7%
Cumulative gain past year
| Period | HII Return | S&P 500 |
|---|---|---|
| 1m | -12.5% | -1.0% |
| 3m | -4.4% | +2.0% |
| 6m | -33.1% | +17.4% |
| 1y | -0.7% | +15.0% |
| ytd | -22.0% | +11.7% |
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HII Fundamental Analysis
HII's revenue trajectory is reaccelerating: Q1 2026 revenue of $3.099 billion grew 13.35% year-over-year versus $2.734 billion in Q1 2025, a marked improvement from the prior-year comparison. The multi-quarter trend shows sequential stability — Q2 2025 at $3.082 billion, Q3 2025 at $3.192 billion, Q4 2025 at $3.476 billion, and Q1 2026 at $3.099 billion — with the Q4 seasonal peak reflecting typical shipbuilding milestone billing. Segment data shows Newport News Shipbuilding as the dominant contributor at $1.665 billion, followed by Mission Technologies at $748 million and Ingalls at $725 million, meaning the nuclear-carrier and submarine franchise drives over half of revenue and ties the company's fate directly to the Navy's most strategically protected programs. Analyst estimates of $16.45 billion average revenue for the forward year imply continued mid-single-digit growth, consistent with the long-duration backlog narrative.
Profitability is thin but improving: Q1 2026 net income was $149 million on a 4.81% net margin, with gross margin of 13.17% and operating margin of 4.87% — modest figures that reflect the cost-plus, low-margin economics of defense shipbuilding, where fixed-price development programs can compress returns. Gross margin has been volatile, ranging from 11.57% in Q4 2025 to 14.41% in Q1 2025, and the Q1 2026 gross margin of 13.17% improved sequentially from Q4's 11.57% but remains below the year-ago 14.41%. Net income has been remarkably steady at $145-$159 million per quarter over the past five quarters, and the trailing PE of 22.10x against a forward PE of 13.42x implies the market expects meaningful EPS expansion — consistent with the $28.12 average forward EPS estimate versus the current quarterly run-rate of roughly $3.79-$4.05.
Balance sheet health is adequate but not fortress-like: debt-to-equity stands at 0.62, the current ratio is 1.13, and ROE is 11.93% with ROA of just 4.28%, reflecting the capital-intensive nature of shipyard operations. Free cash flow is highly seasonal and volatile — TTM FCF is $1.06 billion, but Q1 2026 FCF was -$464 million (versus -$462 million in Q1 2025), driven by a -$685 million working-capital swing and -$390 million in operating cash flow, a recurring pattern as the company builds inventory and receivables early in the year. The company returned $54 million in dividends and $43 million in buybacks in Q1 2026 while holding $216 million in cash, down from $774 million at year-end 2025, and the 1.59% dividend yield with a 35.2% payout ratio remains comfortably covered on a full-year basis. The key risk is that persistent negative first-half free cash flow forces reliance on the balance sheet or debt markets, though the Q4 2025 FCF of $516 million and Q2 2025 FCF of $727 million demonstrate the company's ability to generate substantial cash in the back half.
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?
Because HII is solidly profitable — Q1 2026 net income of $149 million and trailing EPS of $0.045 (reflecting a data anomaly in the trailing figure) — the PE ratio is the appropriate primary metric, and the trailing PE of 22.10x versus a forward PE of 13.42x represents a dramatic 39% compression that signals the market expects a substantial earnings rebound. The forward PE of 13.42x is anchored to the $28.12 average analyst EPS estimate, which implies EPS roughly 7x the current quarterly run-rate, a gap that likely reflects either a data distortion in the trailing EPS or an expectation of major margin recovery and program milestone recognition. The PEG ratio of 2.16 suggests that even on forward earnings, the stock is not cheap relative to its growth rate, while the PS ratio of 1.07 and EV/Sales of 1.06 are low in absolute terms for a defense prime.
Relative to the Aerospace & Defense sector, HII screens as a deep value outlier: its PS ratio of 1.07 and EV/EBITDA of 12.99 compare favorably against typical defense prime multiples, and the PB ratio of 2.63 is moderate for a company with 11.93% ROE. The gross margin of 12.70% and net margin of 4.85% are structurally below peers like Lockheed Martin or RTX, which justifies some discount, but the forward PE of 13.42x versus a sector that often trades in the 18-22x range implies a 25-40% discount that appears excessive given HII's sole-source carrier franchise and the proposed $1.5 trillion Pentagon budget tailwind. The dividend yield of 1.59% with a conservative 35.2% payout ratio also offers income support that many higher-multiple peers lack.
Historically, HII's PE has ranged from a low of roughly 9.4x (Q4 2023) to a high of 25.8x (Q3 2024), with the current trailing PE of 22.10x sitting in the upper-middle of that band — but the forward PE of 13.42x is near the low end of the historical range, suggesting the market is pricing in either significant earnings growth or skepticism about execution. The PS ratio of 1.07 is dramatically below the historical range of 2.46x to 4.82x seen over the past several years, a compression that reflects both the stock's price decline and revenue growth, and positions HII at its cheapest sales multiple in the available data history. This divergence — elevated trailing PE but depressed PS and forward PE — creates a classic value setup if earnings materialize, but also warns that the market is discounting real fundamental risk around shipyard execution and cash flow conversion.
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
HII's financial risk profile is dominated by thin margins and volatile cash conversion. Q1 2026 gross margin of 13.17% remains below the year-ago 14.41%, and the operating margin of 4.87% leaves little buffer for cost overruns on fixed-price development programs. Free cash flow is highly seasonal: Q1 2026 FCF was -$464 million on a -$685 million working-capital swing, and cash fell to $216 million from $774 million at year-end 2025, forcing reliance on the balance sheet. With debt-to-equity at 0.62 and a current ratio of 1.13, the balance sheet is adequate but not fortress-like, and persistent first-half cash burn could pressure liquidity if back-half cash generation (Q4 2025 FCF of $516 million, Q2 2025 FCF of $727 million) disappoints.
Market and competitive risks are significant given the stock's deep underperformance and premium-adjacent valuation on trailing metrics. The trailing PE of 22.10x sits in the upper-middle of HII's historical 9.4x–25.8x range, while the PS ratio of 1.07 is at historical lows, creating a divergence that warns the market is discounting real fundamental risk. Beta of just 0.225 means macro-driven drawdowns are cushioned, but the -40.77% max drawdown was driven by company-specific factors, so position sizing should reflect idiosyncratic risk. Competitive threats from private autonomous-vessel upstarts like Saronic, which are attracting massive funding for robotic warships, could disrupt traditional shipbuilding dynamics, and the Navy's pivot to faster, cheaper autonomous vessels adds long-term uncertainty to HII's franchise programs.
The worst-case scenario would involve a breakdown below the 52-week low of $263.62, triggered by a Q3 earnings miss, further working-capital deterioration, or a program execution failure on Columbia-class submarines or Ford-class carriers. In that scenario, momentum-driven selling could open the door to new multi-year lows, with the analyst low target of $304.00 offering little downside protection since it sits above the current price. From the current $279.69, a decline to the 52-week low of $263.62 represents roughly -5.7%, but a more severe capitulation toward the historical low-end PE of 9.4x applied to trailing EPS would imply a price near $120, though such an extreme is unlikely without a catastrophic program failure. A realistic adverse scenario could see the stock fall 15–20% to the $225–$240 range if execution issues persist and the naval procurement supercycle narrative loses credibility.
FAQ
The most severe risk is financial: Q1 2026 free cash flow was -$464 million on a -$685 million working-capital swing, and cash fell to $216 million from $774 million at year-end 2025, forcing reliance on the balance sheet. Second is margin compression: gross margin of 13.17% remains below the year-ago 14.41%, and the operating margin of 4.87% leaves little buffer for cost overruns on fixed-price development programs. Third is competitive disruption: private upstarts like Saronic are attracting massive funding for autonomous warships, and the Navy's pivot to faster, cheaper vessels could erode HII's long-term franchise value. Fourth is valuation compression: the trailing PE of 22.10x is in the upper-middle of its historical range, and a breakdown below the 52-week low of $263.62 could trigger momentum-driven selling toward the analyst low target of $304.00.
The 12-month forecast spans three scenarios. The base case (50% probability) targets $330–$370, assuming steady execution with mid-single-digit revenue growth and gradual margin recovery toward the analyst average target of $368.42. The bull case (25% probability) targets $400–$439, driven by formal passage of the $1.5 trillion Pentagon budget, gross margin recovery above 14%, and multiple expansion back toward 18–20x forward PE. The bear case (25% probability) targets $240–$304, triggered by a Q3 earnings miss, further working-capital deterioration, or a breakdown below the 52-week low of $263.62. The base case is most likely, with the key assumption being that HII delivers on its raised guidance and full-year free cash flow remains above $1 billion.
HII screens as undervalued on forward metrics but fairly valued on trailing metrics. The forward PE of 13.42x is near the low end of its historical 9.4x–25.8x range and represents a 25–40% discount to the Aerospace & Defense sector's typical 18–22x multiple, while the PS ratio of 1.07 is at its cheapest level in available history versus a historical range of 2.46x–4.82x. However, the trailing PE of 22.10x sits in the upper-middle of its historical band, and the PEG ratio of 2.16 suggests the stock is not cheap relative to its growth rate. The market appears to be pricing in skepticism about the earnings rebound implied by the $28.12 forward EPS estimate, creating a value setup if execution improves.
From a risk/reward perspective, HII offers a compelling but uncertain proposition. The stock trades at a forward PE of 13.42x — a 25–40% discount to defense peers — with analyst targets implying 31.7% upside to $368.42, and revenue grew 13.35% year-over-year in Q1 2026. However, the biggest downside risk is execution: the stock is down 32.72% over six months, just 3.4% above its 52-week low of $263.62, and first-half free cash flow was -$464 million. For value-oriented investors with a 12–18 month horizon who can tolerate volatility, the risk/reward is skewed positively, but momentum-focused traders should wait for a reclaim of the $300–$320 zone before committing capital.
HII is better suited for long-term holding than short-term trading. The stock's beta of 0.225 means it moves only about 22.5% as much as the market, which limits short-term trading opportunities, and the -40.77% max drawdown was driven by company-specific factors rather than broad market volatility. The 1.59% dividend yield with a conservative 35.2% payout ratio provides income support for patient investors, and the multi-decade naval backlog offers long-duration earnings visibility. However, earnings visibility is clouded by seasonal cash-flow volatility and thin margins, so a minimum holding period of 12–18 months is recommended to allow the naval procurement supercycle and margin recovery to materialize. Short-term traders should wait for a reclaim of the $300–$320 zone before considering entry.
