Huntington Ingalls Industries Financial Model
Aerospace and Defence Company Financials Example (Free Excel Download)
Huntington Ingalls Industries (HII) is the largest military shipbuilding company in the United States and a provider of professional services to government and industry partners.
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About this model
This model provides a comprehensive equity valuation and operational forecast for Huntington Ingalls Industries (HII), enabling an analyst to project long-term cash flows based on backlog conversion, shipbuilding contract execution, and margin expansion across its three distinct business segments.
Huntington Ingalls Industries (HII) is the largest military shipbuilding company in the United States and a provider of professional services to government and industry partners. The company is the sole builder of U.S. Navy aircraft carriers and one of only two builders constructing nuclear-powered submarines.
- Business Segments: Newport News Shipbuilding (~50% of revenue), Ingalls Shipbuilding (~25% of revenue), and Mission Technologies (~25% of revenue).
- Key Geographies: Almost entirely United States (U.S. Department of Defense and related agencies).
- Business Model Type: Asset-heavy, long-cycle manufacturing (shipbuilding) combined with a services and technology overlay (Mission Technologies). Revenue is highly visible due to long-term government contracts.
- Competitive Position: Effective duopoly in nuclear submarines (with General Dynamics) and monopoly in nuclear aircraft carriers. Unrivalled moat due to the extreme capital intensity and security clearance requirements of its shipyards.
- Recent Major Events: Achieved $12.48 billion in revenue in 2025 (up 8.2% YoY). The company has heavily focused on expanding capacity and outsourcing (doubled in 2025, targeting 30% growth in 2026) to address supply chain and workforce throughput challenges on pre-COVID contracts.
The downloadable Huntington Ingalls Industries financial model includes SEC-sourced historical financials, forecast assumptions, core operating schedules, and valuation outputs in an Excel workbook built for review and scenario analysis.
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All assumptions in one tab
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Statements always balancing
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Distinct schedules for clarity
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Changes flow through the model
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Historicals & AssumptionsHuntington Ingalls Industries financial modelCompany, Historicals & Assumptions used
Source: SEC EDGAR · values in USD
| Line item | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|
| Revenue | $9.52B | $10.68B | $11.45B | $11.54B | $12.48B |
| General and administrative expenses | $898.0M | $924.0M | $1.02B | $973.0M | $977.0M |
| Operating income | $513.0M | $565.0M | $781.0M | $535.0M | $657.0M |
| Net income | $544.0M | $579.0M | $681.0M | $550.0M | $605.0M |
Forecast assumptions
Defaults used in the downloadable model. Forecast horizon: FY2026–FY2030.
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How to build a detailed financial model for Huntington Ingalls Industries
A complete walkthrough of every driver, margin, working-capital input, and capital-allocation assumption used in the downloadable model.
Revenue Deep Dive
Newport News Shipbuilding
- Revenue Driver Formula: Beginning Backlog + New Awards (Bookings) - Ending Backlog = Revenue Recognized (Percentage-of-Completion).
- Historical Growth Rate: 5-9% (9% growth in 2025).
- Key Growth Levers: Virginia-class and Columbia-class submarine block awards, Gerald R. Ford-class aircraft carrier construction, and nuclear refuelling complex overhauls (RCOH).
- Pricing Dynamics: Cost-plus and fixed-price incentive contracts with the U.S. Navy.
- Revenue Recognition: Over time using the cost-to-cost method.
- Seasonality: Generally linear, though Q4 often sees a spike due to year-end government contract true-ups and milestone completions.
Ingalls Shipbuilding
- Revenue Driver Formula: Active Ship Count x Average Revenue per Ship Phase + Service/Maintenance Revenue.
- Historical Growth Rate: 3-11% (11.2% growth in 2025 to $3.1 billion).
- Key Growth Levers: Arleigh Burke-class (DDG) surface combatants and amphibious assault ships (LHA/LPD).
- Pricing Dynamics: Primarily fixed-price incentive contracts. Subject to cumulative catch-up adjustments based on performance.
- Revenue Recognition: Over time using the cost-to-cost method.
Mission Technologies
- Revenue Driver Formula: Billable Hours x Average Billing Rate + Hardware/Software Deliveries.
- Historical Growth Rate: 3-5% (3.6% growth in 2025 to $3.04 billion).
- Key Growth Levers: C5ISR, cyber, electronic warfare, and unmanned systems (UUVs).
- Pricing Dynamics: Mix of cost-plus, time-and-materials, and firm-fixed-price.
Cost Structure
Variable Costs / COGS
- Line-by-line breakdown: Direct labour, direct materials, overhead (including indirect labour, utilities, and shipyard maintenance).
- Gross Margin Range: 14-18% historically.
- Key Input Costs: Steel, specialized naval components, and highly skilled unionised labour.
- Scaling: Step-function. Shipyards require massive fixed overhead; margins expand significantly when throughput increases and facilities operate at high capacity utilization.
Operating Expenses
- R&D: Very low as a % of revenue (<1%), as the U.S. government funds the vast majority of development costs directly through contracts.
- SG&A: Typically 5-7% of revenue. Highly efficient due to having essentially one major customer (the U.S. Government).
- FAS/CAS Adjustment: A critical line item for defense contractors. It represents the difference between GAAP pension expense (FAS) and pension costs recoverable on government contracts (CAS).
- Depreciation & Amortisation: ~2.5-3.5% of revenue, reflecting the heavy capital intensity of the shipyards.
Margin Profile
- Operating Margin: 4.5% - 6.0% (5.3% in 2025).
- Segment Margins: Newport News (~5-6%), Ingalls (7.6% in 2025), Mission Technologies (5.0% in 2025).
- Margin Trend: Expanding. 2025 saw segment operating margins expand to 5.7% from 5.0% in 2024, driven by throughput improvements and favourable contract adjustments.
Balance Sheet Structure
- Total Assets: ~$12.3 billion.
- Key Asset Categories: Contract Assets (unbilled receivables), Property, Plant & Equipment (shipyards in Virginia and Mississippi), and Goodwill (from Mission Technologies acquisitions).
- Working Capital Profile:
- DSO: 30-45 days (highly reliable government payer).
- Contract Assets/Liabilities: Massive driver of working capital. Cash flow is lumpy based on milestone payments versus continuous cost incurrence.
- Net Working Capital: Often a use of cash during the early phases of major ship construction, reversing upon delivery or major milestone completion.
- PP&E: ~$2.6 billion net. Very long useful lives (up to 40 years for drydocks and heavy cranes).
Capital Expenditure & Investment
- Capex as % of Revenue: 3.0% - 3.5% (Management guidance for discretionary capex).
- Maintenance vs Growth: Roughly 40% maintenance, 60% growth/capacity expansion (e.g., new submarine module facilities, NNS-Charleston Operations).
- M&A Pattern: Bolt-on acquisitions primarily focused on the Mission Technologies segment (e.g., Alion Science and Technology in 2021) to diversify away from pure metal-bending.
Debt & Capital Structure
- Total Debt: ~$2.5 - $2.7 billion.
- Net Debt: ~$1.8 - $1.9 billion (Cash was $774 million at year-end 2025).
- Key Debt Instruments: Senior unsecured notes. Repaid $500 million of 3.844% senior notes in 2025 using cash and commercial paper.
- Interest Rate Profile: Largely fixed-rate bonds.
- Share Repurchase: Paused in 2025 to focus on debt repayment and capacity investment, but historically active (repurchased $163M in 2024).
- Dividend Policy: Strong dividend grower. Increased to $1.38 per share quarterly in late 2025 ($5.52 annualized yield).
Cash Flow Characteristics
- OCF Conversion: Often >1.0x Net Income ($1.2B OCF vs $605M Net Income in 2025).
- Free Cash Flow Margin: ~6.4% in 2025 ($800 million FCF on $12.48 billion revenue).
- Working Capital Impact: Highly volatile quarter-to-quarter. Q1 2026 FCF is projected to be negative $600 million due to a pull-forward of milestone payments into Q4 2025.
- Cash Tax Rate: Typically tracks close to the statutory 21% rate, adjusted for R&D tax credits and state taxes.
Sheet Structure
- Assumptions: Hardcoded drivers for macroeconomic inputs, segment growth, margins, and capital allocation.
- Backlog & Bookings: Schedule tracking beginning backlog, book-to-bill ratio, new awards, and revenue conversion.
- Revenue Build: Revenue projected separately for Newport News, Ingalls, and Mission Technologies.
- Operating Costs & Margins: Segment operating income build, plus corporate unallocated costs and the FAS/CAS pension adjustment.
- Income Statement: Consolidated GAAP P&L down to EPS.
- Balance Sheet: Assets, Liabilities, and Equity. Must include specific lines for Contract Assets and Contract Liabilities.
- Cash Flow Statement: 3-section indirect method.
- Debt Schedule: Tranche-by-tranche bond maturity schedule and interest expense calculation.
- Working Capital Schedule: DSO, DPO, and Contract Asset/Liability days.
- Depreciation & Capex: PP&E roll-forward.
- DCF Valuation: Unlevered free cash flow, WACC calculation, and terminal value.
Key Financial Relationships
- Total Revenue = Newport News Revenue + Ingalls Revenue + Mission Technologies Revenue
- Segment Revenue = Prior Year Segment Revenue x (1 + Segment Growth Rate)
- Book-to-Bill Ratio = Total New Contract Awards / Total Revenue
- Ending Backlog = Beginning Backlog + New Contract Awards - Total Revenue
- Segment Operating Income = Segment Revenue x Segment Operating Margin
- Total Segment Operating Income = Sum of Segment Operating Incomes
- Consolidated Operating Income = Total Segment Operating Income + FAS/CAS Adjustment - Non-segment Corporate Expenses
- EBITDA = Consolidated Operating Income + Depreciation & Amortisation
- Net Interest Expense = (Average Debt Balance x Weighted Average Interest Rate) - (Average Cash Balance x Interest Yield)
- Contract Assets = Total Revenue x (Contract Asset Days / 365)
- Free Cash Flow = Cash from Operations - Capital Expenditures
- Dividends Paid = Shares Outstanding x Annualized Dividend per Share
Cross-Sheet Dependencies
- Backlog & Bookings feeds the Revenue Build.
- Revenue Build feeds the Income Statement and Working Capital Schedule (for DSO/Contract Assets).
- Operating Costs & Margins feeds the Income Statement (Operating Income).
- Debt Schedule feeds Interest Expense on the Income Statement and Debt balances on the Balance Sheet.
- Income Statement (Net Income) feeds the top of the Cash Flow Statement and Retained Earnings on the Balance Sheet.
- Cash Flow Statement (Ending Cash) feeds the Balance Sheet and Debt Schedule (if cash sweep is modeled).
- Circularity risk: Interest expense depends on debt, which depends on cash flow, which depends on interest expense. A circuit breaker (toggle) must be included.
Sign Convention
- Revenue and Assets: Positive.
- Expenses and Capital Expenditures: Positive in their specific schedules, but subtracted in aggregations (e.g., Gross Profit = Revenue - COGS).
- Liabilities and Equity: Positive.
- Cash Flow: Inflows are positive, outflows (uses of cash) are negative.
Things Most Likely to Go Wrong
- FAS/CAS Adjustment Confusion: Failing to separate Segment Operating Income from GAAP Operating Income. The FAS/CAS adjustment must bridge the two; omitting it will cause margins to mismatch filings.
- Working Capital Volatility: Modeling working capital as a smooth % of revenue will fail. HII's cash flows are extremely lumpy due to milestone payments on multi-billion dollar ships.
- Backlog Disconnect: Projecting revenue growth that mathematically exceeds the company's backlog and historical book-to-bill ratios.
- Cumulative Catch-up Adjustments: Historical margins include one-time catch-up adjustments on long-term contracts. Straight-lining historical margins without normalizing for these will skew forecasts.
- Capital Expenditure Understatement: HII is in a heavy investment cycle (3.0-3.5% of revenue). Modeling capex equal to D&A will overstate Free Cash Flow.
- Pension Liability Swings: HII has massive pension obligations. Changes in discount rates can swing the balance sheet equity significantly via Other Comprehensive Income (OCI).
- Share Count Stagnation: Assuming aggressive share buybacks in the near term when management has explicitly paused them to fund capacity expansion and debt reduction.
- Q1 Cash Flow Seasonality: Failing to account for the structural Q1 cash outflow (e.g., negative $600M guided for Q1 2026) due to Q4 pull-forwards.
Validation Checks
- Consolidated Operating Margin: Should remain between 4.5% and 6.5%. Flag if it exceeds 7.0%.
- Capex / Revenue: Must be between 3.0% and 3.5% based on management guidance.
- Book-to-Bill Ratio: Should hover around 1.0x to 1.2x to support low single-digit revenue growth.
- Effective Tax Rate: Should be approximately 20-22%.
- Balance Sheet Check: Total Assets must exactly equal Total Liabilities + Stockholders' Equity.
- Debt / EBITDA: Should remain below 2.5x (currently very healthy).
- Free Cash Flow Conversion: FCF / Net Income should average >1.0x over a 3-year period, despite quarterly lumpiness.
Key Assumptions (Default Values)
| Assumption | Default Value | Unit | Rationale |
|---|---|---|---|
| Newport News Revenue Growth | 6.0 | % | Blended rate based on 9% growth in 2025 and long-term backlog execution. |
| Ingalls Revenue Growth | 4.0 | % | Normalization after an 11.2% spike in 2025. |
| Mission Tech Revenue Growth | 4.5 | % | Based on 2025 growth of 3.6% and strong $12B future contract value secured. |
| Newport News Operating Margin | 5.5 | % | Aligns with historical performance and recent margin expansion. |
| Ingalls Operating Margin | 7.6 | % | Matches actual reported 2025 segment margin. |
| Mission Tech Operating Margin | 5.0 | % | Matches actual reported 2025 segment margin. |
| FAS/CAS Adjustment | 150 | $ Millions | Approximate annual run-rate benefit bridging segment to GAAP operating income. |
| SG&A as % of Revenue | 6.0 | % | Historical average for the consolidated business. |
| Capex as % of Revenue | 3.25 | % | Midpoint of management's 3.0% - 3.5% guidance. |
| Effective Tax Rate | 21.0 | % | Standard U.S. corporate rate, consistent with recent filings. |
| Shares Outstanding | 39.3 | Millions | Actual Q4 2025 reported weighted-average diluted shares. |
| Annual Dividend per Share | 5.52 | $ | Based on Q4 2025 declared quarterly dividend of $1.38. |
| Cost of Debt | 4.0 | % | Estimated weighted average interest rate on senior notes. |
| WACC | 8.5 | % | Standard discount rate for a prime defense contractor with low beta. |
| Terminal Growth Rate | 2.0 | % | Aligns with long-term U.S. defense budget growth expectations. |
Data Sources & Benchmarks
- SEC Filings: HII 10-K and 10-Q filings via SEC EDGAR.
- Investor Relations: HII.com (Earnings presentations, Q4 2025 transcripts).
- Direct Peers: General Dynamics (GD) for shipbuilding/submarines; Lockheed Martin (LMT) and RTX Corp (RTX) for broader defense and Mission Technologies benchmarking.
- Industry Data: U.S. Department of Defense (DoD) Future Years Defense Program (FYDP) and Navy 30-Year Shipbuilding Plan.
Sources
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Frequently asked
What is Huntington Ingalls Industries' primary business?+
Huntington Ingalls Industries (HII) is the largest military shipbuilding company in the United States, specializing in building U.S. Navy aircraft carriers and nuclear-powered submarines. Additionally, HII provides professional services to government and industry partners through its Mission Technologies segment.
How does Huntington Ingalls Industries generate revenue?+
HII generates revenue primarily through long-term government contracts for shipbuilding, with high visibility due to the nature of these agreements. Its three main segments are Newport News Shipbuilding, Ingalls Shipbuilding, and Mission Technologies, with the U.S. Department of Defense being its key customer.
What is the capital expenditure strategy for Huntington Ingalls Industries?+
Huntington Ingalls Industries' capital expenditure is projected to be around 3.0% - 3.5% of revenue, with roughly 60% allocated to growth and capacity expansion. This includes investments in new submarine module facilities and NNS-Charleston Operations.
What is the projected revenue growth rate assumption for Huntington Ingalls Industries in the financial model?+
The financial model for Huntington Ingalls Industries assumes a revenue growth rate of approximately 6.51% (Revenue_Growth=0.06513337469353786). This growth is driven by backlog conversion and shipbuilding contract execution.
What are the key inputs for valuing Huntington Ingalls Industries using a DCF model?+
Key inputs for a DCF valuation of Huntington Ingalls Industries include projections for long-term cash flows, which are based on backlog conversion, shipbuilding contract execution, and margin expansion. The model also considers assumptions like COGS as a percentage of revenue and the effective tax rate.
Where can I download a financial model for Huntington Ingalls Industries?+
A comprehensive equity valuation and operational forecast model for Huntington Ingalls Industries (HII) is available for download. This Excel model covers a forecast horizon from FY2026 to FY2030.
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