Huntington Ingalls Benefits From Strong Naval Shipbuilding Demand

Huntington Ingalls Industries HII is a leading U.S. defense shipbuilder that designs and builds nuclear-powered aircraft carriers, submarines and other advanced naval vessels. Its long-standing relationship with the U.S. Navy and strong demand for naval modernization programs are expected to support its long-term growth.

However, this Zacks Rank #3 (Hold) company faces supply-chain issues and higher material costs that may create operational challenges in the near term.

HII’s Tailwinds

Huntington Ingalls continues to strengthen its position in U.S. naval shipbuilding. It is the sole designer and manufacturer of nuclear-powered aircraft carriers in the United States, and more than 70% of the active U.S. Navy fleet consists of ships built by the company. It has also made steady progress across its key shipbuilding programs, including delivering the Flight III destroyer DDG 128 Ted Stevens, launching DDG 129 Jeremiah Denton, authenticating the keel of DDG 135 Thad Cochran and completing sea trials for DDG 1000 Zumwalt.

The company is also expanding its technological capabilities and global partnerships. It signed a memorandum of agreement with HD Hyundai Heavy Industries to explore collaboration opportunities and partnered with companies such as Babcock International, Shield AI and Thales to develop advanced underwater and cross-domain mission technologies.

Strong demand for Huntington Ingalls’ products continues to drive order growth. The company secured $16.9 billion in contract awards during 2025, resulting in a record backlog of $53.14 billion as of Dec. 31, 2025, of which about $31.99 billion was funded. Such a robust backlog provides strong revenue visibility for the coming years.

Headwinds for HII

Huntington Ingalls relies heavily on subcontractors and third-party suppliers for critical materials and components. Supply disruptions, cost increases or delays from suppliers can raise contract costs and affect project timelines, which may pressure margins if actual costs exceed pricing assumptions in government contracts.

The company’s Newport News Shipbuilding segment has also been facing performance challenges in aircraft carrier construction due to workforce shortages, supply-chain disruptions and infrastructure constraints. In 2025, the company reported unfavorable cumulative catch-up adjustments of about $350 million related to these issues. Although efforts to recruit and train new workers are ongoing, high turnover and the long training period required for specialized shipbuilding skills may continue to affect program execution in the near term.

HII Stock’s Price Performance

Shares of HII have gained 25.9% in the past three months compared with the industry’s 3.6% growth.

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Stocks to Consider

Some better-ranked stocks from the same industry are Draganfly DPRO, GE Aerospace GE and Howmet Aerospace HWM. Each of these stocks currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for DPRO’s 2026 loss is pinned at $1.11 per share, which indicates year-over-year improvement. The Zacks Consensus Estimate for DPRO’s 2026 sales is pinned at $5.9 million, which indicates year-over-year growth of 24%.

GE delivered an average earnings surprise of 14.27% in the last four quarters. The consensus estimate for GE’s 2026 earnings is pegged at $7.44 per share, which implies year-over-year growth of 16.8%.

HWM delivered an average earnings surprise of 7.24% in the last four quarters. The consensus estimate for HWM’s 2026 earnings stands at $4.55 per share, which suggests year-over-year growth of 20.7%.

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This article originally published on Zacks Investment Research (zacks.com).

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