The combination of a strong EPS beat, raised guidance on both revenue and margins, and $6.7B in new contract awards validates the shipbuilding throughput improvement narrative. However, the large negative free cash flow swing ($150M use vs. $730M source in Q2 2025) and cash balance dropping to $12M from $774M at year-end warrant close monitoring of working capital management. Traders should watch the upcoming conference call for details on cash flow trajectory and the FF(X) frigate contract ramp.
Price Chart
Executive Summary
HII reported Q2 2026 EPS of $5.27, a 38% beat vs. consensus of $3.82, on revenue of $3.4B (7.9% above estimates). Revenue grew 10.9% YoY, operating margin expanded 86 bps to 6.1%, and the company raised its FY26 shipbuilding revenue guidance to $10.2B-$10.4B and raised the low end of shipbuilding margin guidance to 6.0%. This is a strong beat across the board with raised guidance, signaling improving execution and demand.
Key Financial Metrics
Key Facts
- Q2 2026 revenue of $3.4B, up 10.9% YoY and 7.9% above $3.15B consensus
- GAAP diluted EPS of $5.27, up 36.5% YoY and 38% above $3.82 consensus
- Operating income of $210M, up 28.8% YoY; operating margin expanded to 6.1% from 5.3%
- FY26 shipbuilding revenue guidance raised to $10.2B-$10.4B from $9.7B-$9.9B
- Shipbuilding operating margin guidance low end raised to 6.0% from 5.5%
- New contract awards of $6.7B in Q2; total backlog grew to $57.3B
- Free cash flow was negative $150M in Q2 vs. positive $730M in Q2 2025, heavily driven by working capital
Financial Impact
EPS beat by 38% ($1.45/sh) and revenue beat by $250M; guidance raised by $500M at midpoint on shipbuilding revenue
Risk Factors
- Cash balance plummeted to $12M from $774M at year-end 2025, driven by negative operating cash flow of $421M YTD and capex of $193M
- Mission Technologies revenue declined 3.9% YoY, partially offsetting shipbuilding strength
- Heavy dependence on U.S. government appropriations and budget cycles
- Ingalls and Newport News segment margins both contracted YoY (Ingalls 6.9% vs 7.5%, Newport News 6.0% vs 5.1%)
- Free cash flow guidance of $500-$600M may be at risk given the $611M negative FCF through H1
Market Snapshot
Investment Themes
Documents Analyzed
This report is based on 6 SEC documents filed with EDGAR.
| Document | Accession Number |
|---|---|
| 8-K Filing (Primary) | 0001501585-26-000045 |
| Document: hii-20260730.htm | 0001501585-26-000045 |
| Document: 0001501585-26-000045-index-headers.html | 0001501585-26-000045 |
| Document: 0001501585-26-000045-index.html | 0001501585-26-000045 |
| Document: 0001501585-26-000045.txt | 0001501585-26-000045 |
| 8-K Data (Synthetic) | 0001501585-26-000045 |
Filters
| Type | Now | ||||
|---|---|---|---|---|---|
Sep 11, 2026 21d ago | Press Release | $279.69 $272.86 | ▼ −2.44% | ▼ −2.22% | $268.61 (−3.96%) |
Aug 11, 2026 7w ago | Press Release | $327.85 $317.61 | ▼ −3.12% | ▼ −2.72% | $268.61 (−18.07%) |
Aug 11, 2026 7w ago | Insider Cluster | $327.85 $317.61 | ▼ −3.12% | ▼ −2.72% | $268.61 (−18.07%) |
Aug 10, 2026 7w ago | 144 | $330.81 $318.34 | ▼ −3.77% | ▼ −3.72% | $268.61 (−18.80%) |
Aug 5, 2026 8w ago | Press Release | $317.70 $326.80 | ▲ +2.86% | ▲ +2.51% | $268.61 (−15.45%) |
Aug 3, 2026 8w ago | Press Release | $325.95 $330.67 | ▲ +1.45% | ▼ −0.58% | $268.61 (−17.59%) |
Jul 30, 2026 9w ago | 8-K | $319.90 $321.76 | ▲ +0.58% | ▼ −3.04% | $268.61 (−16.03%) |
Jul 29, 2026 9w ago | Press Release | $319.90 $321.76 | ▲ +0.58% | ▼ −3.04% | $268.61 (−16.03%) |
Jul 10, 2026 12w ago | Press Release | $286.09 $271.05 | ▼ −5.26% | ▼ −4.70% | $268.61 (−6.11%) |
Jul 9, 2026 12w ago | GOVT-CONTRACT | $286.21 $271.05 | ▼ −5.30% | ▼ −5.17% | $268.61 (−6.15%) |
US Market Status
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