Huntington Ingalls Industries warned investors that it expects free cash flow to be negative in the current quarter, despite exceeding consensus profit estimates for its latest reporting period. The company’s guidance follows a year in which net cash provided by operating activities reached $1.196 billion, but free cash flow was only $800 million, up from $40 million in the prior year. Management cited increased working capital requirements on large shipbuilding programs and upfront investments in material and labor as drivers of the cash outflow. The announcement triggered an 11% decline in HII’s stock by midday trading, as market participants weighed the impact of higher capital needs on the company’s liquidity and funding costs.

In the fourth quarter, HII reported revenues of $3.476 billion, a 15.7% increase over the prior-year period, driven primarily by a 19.1% rise in Newport News Shipbuilding revenues to $1.891 billion. Segment operating income at Newport News more than doubled, climbing 121.1% to $84 million and lifting its operating margin to 4.4%. Overall fourth-quarter diluted earnings per share rose 28.3% year-over-year to $4.04, up from $3.15 in Q4 2024, while consolidated operating income jumped 56.4% to $172 million. All three business segments delivered higher operating income, reflecting favorable contract adjustments on submarine and aircraft carrier programs and lower cumulative catch-up charges compared to the prior year.

For 2025, HII achieved revenues of $12.484 billion, an 8.2% increase over 2024, and diluted earnings per share of $15.39, up 10.2%. The company invested over $400 million in capital improvements, completed delivery of the Virginia-class submarine Massachusetts (SSN 798) and guided missile destroyer Ted Stevens (DDG 128), and achieved approximately 14% shipbuilding throughput growth. Segment operating income rose 25.1% to $717 million, and operating margin expanded by 78 basis points to 5.7%. Management is targeting roughly 15% throughput growth in 2026, with more than 40 ships in active construction or modernization across Ingalls and Newport News facilities.