Core Insights - Huntington Ingalls (HII) reported a revenue of $3.19 billion for the quarter ended September 2025, reflecting a year-over-year increase of 16.1% [1] - The earnings per share (EPS) for the quarter was $3.68, up from $2.56 in the same quarter last year, indicating strong growth [1] - The reported revenue exceeded the Zacks Consensus Estimate of $2.94 billion by 8.44%, and the EPS also surpassed the consensus estimate of $3.29 by 11.85% [1] Revenue Breakdown - Mission Technologies generated sales and service revenues of $787 million, exceeding the average estimate of $735.27 million, with a year-over-year increase of 11% [4] - Ingalls reported sales and service revenues of $828 million, surpassing the average estimate of $710.72 million, marking a significant year-over-year increase of 24.7% [4] - Newport News achieved sales and service revenues of $1.62 billion, compared to the average estimate of $1.53 billion, reflecting a year-over-year change of 14.5% [4] - Intersegment eliminations reported a revenue of $-40 million, slightly worse than the average estimate of $-38.2 million, but still showing an 11.1% year-over-year improvement [4] Operating Income Analysis - Segment operating income for Ingalls was $65 million, exceeding the average estimate of $52.23 million [4] - Newport News reported segment operating income of $80 million, above the average estimate of $77.02 million [4] - Mission Technologies achieved segment operating income of $34 million, surpassing the average estimate of $28.15 million [4] - Non-segment factors affecting operating income included an operating FAS/CAS adjustment of $9 million, better than the estimated loss of $10.27 million [4] - Non-current state income taxes also reported $9 million, compared to an estimated loss of $10.14 million [4] Stock Performance - Shares of Huntington Ingalls have returned +4.3% over the past month, outperforming the Zacks S&P 500 composite's +3.6% change [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3]

Financial Performance - Sales and service revenues for the three months ended September 30, 2025, increased by $443 million, or 16%, compared to the same period in 2024, primarily due to higher volumes at Newport News, Ingalls, and Mission Technologies [97]. - Operating income for the three months ended September 30, 2025, was $161 million, representing a 96% increase from $82 million in the same period in 2024 [92]. - Net earnings for the three months ended September 30, 2025, were $145 million, a 44% increase compared to $101 million in the same period in 2024 [92]. - Total sales and service revenues for the nine months ended September 30, 2025, were $9,008 million, an increase of 6% from $8,531 million in the same period of 2024 [116]. - Cash provided by operating activities for the nine months ended September 30, 2025, was $546 million, a significant increase from $2 million in the same period of 2024 [152]. - Free cash flow for the nine months ended September 30, 2025, increased by $521 million to $284 million, primarily due to favorable changes in trade working capital [157]. Segment Performance - Ingalls segment operating income increased to $65 million in Q3 2025, a 33% rise from $49 million in Q3 2024 [119]. - Newport News segment operating income surged to $80 million in Q3 2025, compared to $15 million in Q3 2024, reflecting a 433% increase [116]. - Mission Technologies segment operating income remained stable at $34 million in Q3 2025, a slight increase of 3% from $33 million in Q3 2024 [116]. - Newport News revenues for the three months ended September 30, 2025, increased by $205 million, or 15%, primarily driven by higher volumes in submarines and aircraft carriers [125]. - Mission Technologies revenues for the three months ended September 30, 2025, increased by $78 million, or 11%, primarily due to higher volumes in C5ISR and cyber solutions [129]. - Total Newport News revenues for the nine months ended September 30, 2025, increased by $235 million, or 5%, compared to the same period in 2024 [133]. Cost and Expenses - General and administrative expenses for the three months ended September 30, 2025, decreased by $7 million from the same period in 2024, primarily due to lower overhead costs [104]. - Segment cost of product sales for the three months ended September 30, 2025, increased by $264 million, or 17%, primarily due to higher volumes in submarines and aircraft carriers [134]. - Interest expense for the nine months ended September 30, 2025, increased by $11 million, or 16%, compared to the same period in 2024 [92]. - Non-current state income tax expense was $9 million in Q3 2025, compared to a benefit of $1 million in Q3 2024, indicating a significant unfavorable change [113]. - Interest expense for the nine months ended September 30, 2025, increased to $79 million from $68 million in the same period of 2024, driven by higher long-term debt [140]. Risks and Challenges - The federal budget environment remains a significant long-term risk, with uncertainty in defense discretionary spending impacting the defense industrial base [81]. - The global geopolitical and economic environment continues to be impacted by heightened tensions and instability, affecting the defense market [88]. - The company is exposed to cost inflation for raw materials and components, which may impact financial position and cash flows if persistent [170]. Contracts and Backlog - Total backlog as of September 30, 2025, was $55.7 billion, up from $48.7 billion at the end of 2024, with U.S. Government orders comprising substantially all of the backlog [146]. - New contract awards during the nine months ended September 30, 2025, totaled approximately $16.0 billion, driven by awards at Newport News and Ingalls [148]. - The company is constructing 12 new Columbia class (SSBN 826) submarines, which will carry approximately 70% of the nation's nuclear arsenal [166]. - The company has contracts to construct multiple Arleigh Burke class (DDG 51) destroyers, including Ted Stevens (DDG 128) and Jeremiah Denton (DDG 129) [166]. - The company has been awarded contracts for the detail design and construction of Helmand Province (LHA 10) and is currently constructing Bougainville (LHA 8) and Fallujah (LHA 9) [166]. Other Financial Information - The company reported a net cumulative catch-up revenue adjustment of $(3) million for the three months ended September 30, 2025, compared to $(72) million in 2024 [98]. - Other net income for the nine months ended September 30, 2025, rose to $30 million from $21 million in 2024, mainly due to increased unrealized gains on investments [143]. - Effective income tax rate for the nine months ended September 30, 2025, was 23.0%, compared to 16.6% in 2024, largely due to reduced estimated research and development tax credits [144]. - The company has a $1.7 billion revolving credit facility and a $1.7 billion commercial paper program, with no outstanding indebtedness as of September 30, 2025 [169].

Core Insights - U.S. stocks exhibited mixed performance, with the Dow Jones index increasing by approximately 200 points on Thursday [1] Company Performance - Cardinal Health, Inc. reported quarterly earnings of $2.55 per share, surpassing the analyst consensus estimate of $2.18 per share, and quarterly sales of $64.009 billion, exceeding the consensus estimate of $59.197 billion [2] - Following the positive earnings report, Cardinal Health shares surged by 17.5% to $193.26 on Thursday [2] - Guardant Health, Inc. saw its shares jump by 29.3% to $93.45 after reporting better-than-expected third-quarter results and raising its FY25 sales guidance [4] - Emergent BioSolutions Inc. experienced a 29% increase in shares to $12.11 after also reporting better-than-expected quarterly results and raising its FY25 sales guidance [4] - Glaukos Corporation's shares surged by 28.7% to $99.20 following a strong quarterly performance and an upward revision of its FY25 sales guidance [4] - C.H. Robinson Worldwide, Inc. shares rose by 21.3% to $156.66 after reporting better-than-expected third-quarter adjusted EPS results [4] - Viavi Solutions Inc. gained 21.1% to $16.93 after exceeding first-quarter estimates and issuing optimistic second-quarter guidance [4] - Perimeter Solutions, Inc. rose by 21% to $25.96 following positive earnings results [4] - FormFactor, Inc. gained 21% to $57.71 after reporting better-than-expected third-quarter results and providing favorable fourth-quarter guidance [4] - Metsera, Inc. saw a 20.9% increase to $63.15 after Novo Nordisk confirmed an unsolicited acquisition proposal [4] - Immunovant, Inc. shares increased by 20% to $26.00 [4] - Bausch Health Companies Inc. rose by 15% to $6.79 after reporting better-than-expected third-quarter results and raising its FY25 sales guidance [4] - Insmed Incorporated gained 11.8% to $186.35 after raising its FY2025 global ARIKAYCE sales guidance [4] - XPO, Inc. shares rose by 11.3% to $138.82 following strong quarterly earnings [4] - WESCO International, Inc. increased by 10% to $251.41 after posting positive quarterly results [4] - Calix, Inc. gained 9.3% to $68.00 after reporting better-than-expected third-quarter results and issuing optimistic current-quarter guidance [4] - CommScope Holding Company, Inc. shares rose by 8.1% to $17.02 after exceeding quarterly estimates [4] - Huntington Ingalls Industries, Inc. gained 7.3% to $320.12 after reporting third-quarter results above estimates [4] - Extreme Networks, Inc. jumped by 7.2% to $19.31 following positive quarterly earnings [4] - Fox Corporation gained 6.4% to $57.83 after reporting better-than-expected quarterly results and announcing a $1.5 billion accelerated share buyback [4] - Alphabet Inc. rose by 5.2% to $289.57 following strong quarterly results [4]

Financial Data and Key Metrics Changes - The company reported record third quarter sales of $3.2 billion, an increase of 16.1% year over year, with diluted earnings per share of $3.68 compared to $2.56 in the same period last year [5][15][18] - Shipbuilding sales grew by 18% year over year, driven by increased throughput in shipyards [5][15] - Mission Technologies saw an 11% sales growth, reaching $787 million, supported by innovative solutions in critical areas [5][16] Business Line Data and Key Metrics Changes - Ingalls revenues reached a record $828 million, up 24.7% year over year, primarily due to higher material volume and surface combatants [15][17] - Newport News revenues increased by 14.5% to $1.6 billion, driven by higher volumes in submarine and aircraft carrier programs [15][17] - Shipbuilding revenue totaled $2.4 billion, exceeding guidance due to higher than expected material receipts and wage investments [15][16] Market Data and Key Metrics Changes - The company secured $2 billion in contract awards during the third quarter, with a backlog of $56 billion, of which $33 billion is funded [7] - The operational initiatives are expected to yield a throughput improvement of approximately 15% for the full year 2025 [10] Company Strategy and Development Direction - The company is committed to accelerating shipbuilding construction to meet customer requirements and is focusing on increasing throughput across shipbuilding programs [5][10] - Strategic partnerships have been formed to enhance capabilities in unmanned systems and autonomy solutions, indicating a focus on innovation and technology integration [8][49] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the operational initiatives and the positive impact of investments in workforce, infrastructure, and supply chain on throughput [10][12] - The company is monitoring the federal government's funding situation closely, as it could impact Mission Technologies programs [12][13] Other Important Information - The company announced a modest increase in its quarterly dividend to $1.38 per share [19][20] - Free cash flow guidance for 2025 has been updated to between $550 million and $650 million [22] Q&A Session Summary Question: Impact of government shutdown on Virginia Block 6 and Columbia negotiations - Management indicated that furloughs are not impacting negotiations and that efforts are ongoing to finalize contracts by year-end [26][27] Question: Retention rates and wage increases at Ingalls - Discussions are ongoing with the union at Ingalls regarding wage increases, with hopes to finalize by early next year [29] Question: Shipbuilding revenue growth and future expectations - Management noted that while Q3 showed strong growth, they are cautious about Q4 projections and expect to evaluate guidance in February [34][36] Question: Unmanned vessels partnership strategy - The company is leveraging open-source software for autonomy in unmanned vessels and forming partnerships to enhance capabilities [48][49] Question: Future cash flow expectations - Management expects a conservative cash flow trajectory of about $600 million for 2025 and 2026, with potential for growth as new contracts are executed [70][72]

Financial Data and Key Metrics Changes - The company reported record third quarter sales of $3.2 billion, representing a 16.1% increase year-over-year [14] - Diluted earnings per share for the quarter were $3.68, up from $2.56 in the same period last year [17] - Shipbuilding sales grew by 18% year-over-year, driven by increased throughput in shipyards [5][14] - Mission Technologies saw an 11% sales growth, reaching $787 million [15] Business Line Data and Key Metrics Changes - Ingalls revenues reached a record $828 million, increasing by 24.7% compared to the third quarter of 2024, primarily due to higher material volume and surface combatants [14] - Newport News revenues were $1.6 billion, up 14.5% year-over-year, driven by higher volumes in submarine and aircraft carrier programs [14] - Shipbuilding revenue totaled $2.4 billion, exceeding guidance due to higher than expected material receipts [15] Market Data and Key Metrics Changes - The company secured $2 billion in contract awards during the third quarter, with a backlog of $56 billion, of which $33 billion is funded [6] - The demand for products and services remains strong, particularly in areas such as C5ISR, cyber electronic warfare, and unmanned systems [5][15] Company Strategy and Development Direction - The company is committed to accelerating shipbuilding construction to meet customer requirements and is focusing on increasing throughput across shipbuilding programs [5][9] - Strategic partnerships have been formed to enhance capabilities in unmanned systems and autonomy solutions [7][50] - The company is also pursuing a $250 million annualized cost reduction initiative [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving approximately 15% throughput improvement for the full year 2025, supported by investments in workforce and infrastructure [9] - The company is closely monitoring the impact of federal government appropriations on operations, with shipbuilding being a priority area [11][12] - Future contract awards, particularly for Virginia-class Block IV and Columbia-class submarines, are critical for maintaining guidance [21] Other Important Information - The effective tax rate for the quarter was 28.9%, higher than initial expectations due to a reduction in estimated research and development tax credits [17] - Free cash flow for the quarter was $16 million, with updated guidance for 2025 free cash flow set between $550 million and $650 million [22] Q&A Session Summary Question: Impact of government shutdown on Virginia Block IV and Columbia negotiations - Management indicated that furloughs are not impacting negotiations and that efforts are ongoing to finalize contracts by year-end [26][27] Question: Wage increases at Ingalls - Discussions are ongoing with the union at Ingalls regarding wage increases, expected to be resolved by early next year [30] Question: Shipbuilding revenue growth and guidance - Management explained that while Q3 saw significant growth, guidance for Q4 remains cautious due to the need for consistent performance [35][36] Question: Unmanned vessels partnership strategy - The company is leveraging open-source software for autonomy in unmanned vessels and forming partnerships to enhance capabilities [49][50] Question: Future cash flow expectations - Management provided insights on maintaining a conservative cash flow guidance, with expectations for incremental profitability as new contracts are executed [70][71]

Financial Data and Key Metrics Changes - The company reported record third quarter sales of $3.2 billion, with diluted earnings per share of $3.68, representing an increase of 16.1% year over year [4][14] - Shipbuilding sales grew by 18% year over year, while Mission Technologies saw an 11% increase in sales [4][16] - The effective tax rate for the quarter was 28.9%, higher than initial expectations due to a reduction in the estimated research and development tax credit [18] Business Line Data and Key Metrics Changes - Ingalls revenues reached a record $828 million, up 24.7% compared to the same quarter last year, driven by higher material volume and surface combatants [14][15] - Newport News revenues were $1.6 billion, an increase of 14.5% year over year, primarily due to higher volumes in submarine and aircraft carrier programs [15][16] - Mission Technologies revenues were $787 million, reflecting an 11% increase, driven by growth in areas such as C5, ISR, cyber, and unmanned systems [16][18] Market Data and Key Metrics Changes - The company secured $2 billion in contract awards during the third quarter, with a backlog totaling $56 billion, of which $33 billion is funded [5][12] - The company is making progress on key programs, including the Virginia-class Block IV submarines and the CVN 79 Kennedy aircraft carrier [5][12] Company Strategy and Development Direction - The company is focused on accelerating shipbuilding construction to meet customer requirements and is working to increase throughput across shipbuilding programs [4][9] - A $250 million annualized cost reduction initiative is on track, and the company is pursuing new contract awards, including negotiations for the Virginia-class Block 6 and Columbia-class awards [10][21] - The company is expanding its industrial base through a distributed shipbuilding strategy, partnering with shipyards and fabricators in multiple states [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving approximately 15% throughput improvement for the full year 2025, supported by investments in workforce and infrastructure [9][21] - The company is monitoring the impact of federal government appropriations on its programs, noting that shipbuilding remains a priority [11][12] - Management reiterated a solid outlook for the remainder of the year, with expectations for continued growth in shipbuilding revenue and margins [20][23] Other Important Information - The company ended the quarter with a cash balance of $312 million and total liquidity of approximately $2 billion [19] - A modest increase in the quarterly dividend to $1.38 per share was announced [19] Q&A Session Summary Question: Impact of government shutdown on Virginia Block 6 and Columbia negotiations - Management indicated that furloughs are not impacting negotiations and that the team is working hard to finalize contracts by year-end [25][26] Question: Clarification on shipbuilding revenue guidance - Management explained that while Q3 revenue exceeded expectations, the full-year guidance was adjusted conservatively due to anticipated performance in Q4 [29][30] Question: Details on unmanned vessel partnerships - Management highlighted partnerships with Shield AI and others to enhance autonomy solutions for unmanned vessels, emphasizing the importance of open-source software [40][41] Question: Future cash flow expectations - Management provided insights on cash flow projections, indicating a conservative approach while expecting incremental profitability as new contracts are executed [56][59] Question: Contract mix and its impact on margins - Management noted that the transition from pre-COVID to post-COVID contracts will lead to improved margins over time, with expectations for more than 50% of work being post-COVID by 2027 [66]

Core Insights - Huntington Ingalls (HII) reported quarterly earnings of $3.68 per share, exceeding the Zacks Consensus Estimate of $3.29 per share, and up from $2.56 per share a year ago, representing an earnings surprise of +11.85% [1] - The company achieved revenues of $3.19 billion for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 8.44%, compared to $2.75 billion in the same quarter last year [2] - The stock has increased approximately 57.9% year-to-date, significantly outperforming the S&P 500's gain of 17.2% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $3.82 on revenues of $3.19 billion, while for the current fiscal year, the estimate is $14.75 on revenues of $11.96 billion [7] - The estimate revisions trend for Huntington Ingalls was mixed prior to the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - The Aerospace - Defense industry, to which Huntington Ingalls belongs, is currently ranked in the bottom 33% of over 250 Zacks industries, suggesting potential challenges ahead [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact investor sentiment [5]

Cautionary Statement Regarding Forward-looking Statements Q3 2025 Earnings Call Statements in this presentation and in our other filings with the SEC, as well as other statements we may make from time to time, other than statements of historical fact, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by words such as "may," "will," "should," "expects," "intends," "plans," "anticipates ...

Core Insights - Diamond Hill Capital's "Select Fund" underperformed the Russell 3000 Index in Q3 2025, returning 4.98% compared to the index's 8% gain [1] - The fund highlighted Huntington Ingalls Industries, Inc. (NYSE:HII) as a key investment, noting its strong performance and potential in the defense sector [2][3] Company Performance - Huntington Ingalls Industries, Inc. (NYSE:HII) achieved a one-month return of 4.34% and a 52-week gain of 19.13%, closing at $298.42 per share with a market capitalization of $11.71 billion on October 29, 2025 [2] - The company is recognized as a top contributor to the fund's performance in Q3, with improvements in employee attrition and strong demand anticipated from the US Department of Defense [3] Market Position and Outlook - Huntington Ingalls is well-positioned to meet the Department of Defense's needs, particularly in light of potential conflicts in the Pacific, which is expected to drive demand for the next five-plus years [3] - Despite its potential, Huntington Ingalls is not among the top 30 most popular stocks among hedge funds, with 36 hedge fund portfolios holding its stock at the end of Q2 2025, an increase from 33 in the previous quarter [4]

Core Insights - HII reported third quarter 2025 revenues of $3.2 billion, a 16.1% increase from the same period in 2024, driven by growth in Newport News Shipbuilding, Ingalls Shipbuilding, and Mission Technologies [2][4] - Operating income for the third quarter was $161 million with an operating margin of 5.0%, compared to $82 million and 3.0% in the same quarter of 2024 [2][4] - Net earnings for the quarter were $145 million, up from $101 million in the third quarter of 2024, resulting in diluted earnings per share of $3.68, compared to $2.56 in the prior year [4][7] Financial Performance - Segment operating income for the third quarter was $179 million with a segment operating margin of 5.6%, compared to $97 million and 3.5% in the same quarter of 2024 [3][6] - New contract awards in the third quarter totaled $2.0 billion, increasing the total backlog to $55.7 billion as of September 30, 2025 [5][17] - Free cash flow for the quarter was $16 million, down from $136 million in the third quarter of 2024 [4][42] Segment Analysis Ingalls Shipbuilding - Revenues for Ingalls Shipbuilding in the third quarter were $828 million, a 24.7% increase from $664 million in the same period of 2024, primarily due to higher volumes in surface combatants [8][9] - Segment operating income was $65 million, up from $49 million, with a segment operating margin of 7.9% compared to 7.4% in the previous year [9] Newport News Shipbuilding - Newport News Shipbuilding reported revenues of $1.6 billion, a 14.5% increase from $1.4 billion in the same quarter of 2024, driven by higher volumes in submarines and aircraft carriers [10][11] - Segment operating income increased to $80 million from $15 million, with a segment operating margin of 4.9% compared to 1.1% in the prior year [11] Mission Technologies - Mission Technologies generated revenues of $787 million, an 11.0% increase from $709 million in the same quarter of 2024, attributed to higher volumes in various technology solutions [12][13] - Segment operating income was $34 million, slightly up from $33 million, with a segment operating margin of 4.3%, down from 4.7% in the previous year [13] Operational Highlights - The company completed builder's sea trials for the guided missile destroyer Ted Stevens (DDG 128) and initial sea trials of the Virginia-Class Submarine Massachusetts (SSN 798) [7][9][11] - HII achieved a book-to-bill ratio of 1.25x in the third quarter [17] Financial Outlook - The company updated its fiscal year 2025 outlook, projecting shipbuilding revenue between $9.0 billion and $9.1 billion, with an operating margin of 5.5% to 6.5% [16][17] - Mission Technologies revenue is expected to be between $3.0 billion and $3.1 billion, with a segment operating margin of approximately 4.5% [17]