Last Update 17 Mar 26

Fair value Increased 5.89%

HII: Wage Agreements And Policy Shifts Will Shape Shipbuilding Upswing

The analyst price target for Huntington Ingalls Industries is now $403.00, up from $380.60, as analysts factor in updated union wage agreements, revised productivity assumptions, and a range of recent target revisions across the Street.

Analyst Commentary

Recent research updates on Huntington Ingalls Industries point to a mix of supportive and cautious views as analysts refresh their assumptions around labor costs, execution, and sector-wide defense spending priorities.

Bullish Takeaways

Bullish analysts raising price targets into the $412 to $460 range point to updated models that factor in resolved union wage discussions. They see this as helping reduce disruption risk and support execution on existing contracts.
Some price target increases are tied to refreshed aerospace and defense sector work. In that context, analysts frame Huntington Ingalls as a beneficiary if sector momentum into 2026 holds, which flows through to higher valuation assumptions.
Higher targets from several firms cluster well above the current blended target of $403. This signals that a portion of the Street still sees room in their models for stronger execution or improved contract economics versus prior expectations.
Analysts who keep positive ratings alongside higher targets are effectively expressing confidence that recent wage agreements and sector funding signals can be managed within margin frameworks they view as reasonable.

Bearish Takeaways

The removal of Huntington Ingalls from a major US Conviction List indicates that at least some bearish analysts see fewer near term catalysts or a less compelling risk reward profile than before, even if they do not necessarily turn negative on the stock.
Goldman Sachs reducing its target by $6 after previously raising it by $41 shows that there is active debate around the right valuation level. Some analysts are trimming expectations as new information and policy signals emerge.
References to a volatile start to 2026, including policy moves on capital deployment and executive compensation, underscore that there is still high uncertainty. This can weigh on how confidently analysts are willing to underwrite higher multiples.
The presence of both raised and lowered targets within a short time frame suggests that Street views are not aligned, so investors should expect a wider range of outcomes in analyst models tied to execution, budget decisions, and labor cost pass throughs.

What's in the News

HII announced that all five collective bargaining units at its Ingalls Shipbuilding division ratified new agreements that secure an immediate base wage increase of at least 18% for union shipbuilders, with projected wage growth of 35% to 47% through March 8, 2031, and leadership indicating expectations for improved recruitment and attrition (Key Developments).
HII reported a partnership focused on modernizing data collection, validation, and analysis for its REMUS unmanned underwater vehicles and ROMULUS unmanned surface vessels. The partnership aims to standardize workflows and support broader deployment across the manufacturing pipeline in 2026 (Key Developments).
HII and Path Robotics signed a memorandum of understanding to explore using physical AI welding in shipbuilding. The agreement focuses on autonomous shipbuilding capabilities, workforce training, and integrating these systems with other shipyard technologies including the ROMULUS line (Key Developments).
HII stated that its Mission Technologies division is among 12 companies on the Advanced Technology Support Program V contract, a 10 year, US$25.4b multiple award IDIQ focused on engineering solutions for electronics and software systems (Key Developments).
CBS News reported that President Trump and Secretary Hegseth plan to meet with CEOs of major defense companies, including HII, to discuss weapons production, according to reporting by Weijia Jiang (Periodicals, CBS News).

Valuation Changes

Fair Value: Updated to $403.00 from $380.60, a modest uplift that aligns the model with the new analyst price target level.
Discount Rate: Adjusted slightly higher to 7.96% from 7.94%, a small change that marginally reduces the present value of future cash flows in the model.
Revenue Growth: Tweaked to 5.31% from 5.34%, indicating only a very small change in long run top line growth assumptions in dollar terms.
Net Profit Margin: Increased to 6.25% from 5.95%, reflecting a somewhat stronger modeled earnings margin on future $ revenue than in the prior framework.
Future P/E: Reduced to 21.69x from 22.33x, implying a slightly lower valuation multiple applied to expected $ earnings than before.

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Key Takeaways

Favorable defense policy trends, new tech segment wins, and backlog growth drive strong long-term revenue potential, margin expansion, and cash flow stability.
Operational improvements, tech partnerships, and industrial base revitalization enhance efficiency, reduce costs, and support consistent earnings growth.
Dependence on large, delayed contracts, ongoing supply chain and labor challenges, and political budget uncertainty all threaten long-term growth, margins, and revenue stability.

Catalysts

About Huntington Ingalls Industries

Designs, builds, overhauls, and repairs military ships in the United States.What are the underlying business or industry changes driving this perspective?

Sustained increases in U.S. defense budgets and policy tailwinds, as evidenced by multi-year funding allocations in the FY26 budget (including support for Columbia-class, Virginia-class, and amphibious ship programs) and the reconciliation bill's directed industrial base investments, ensure robust multi-year order flow and underpin long-term revenue growth and backlog visibility.
The accelerated shift towards autonomous and unmanned maritime systems-highlighted by HII's Mission Technologies segment winning new U.S. Navy orders for uncrewed undersea vehicles and opportunities for 200+ further vehicles-positions HII to benefit disproportionately from expansion in high-growth, technologically advanced defense segments, supporting revenue diversification and potential margin expansion.
Strategic partnerships with leading tech firms (such as the C3 AI collaboration for digital transformation) and significant investments in advanced manufacturing are driving operational efficiency and throughput gains, which in turn are expected to lower costs and gradually lift shipbuilding net margins and return on capital.
The revitalization and expansion of the U.S. maritime industrial base, supported by increased outsourcing, supply chain stabilization efforts, and targeted workforce investments (notably effective wage increases and hiring), are enabling HII to execute a 20% throughput improvement plan, directly translating into enhanced cash flow and improved earnings consistency.
A steadily growing backlog ($56.9 billion) built upon multi-year, multi-program contracts-alongside visible recurring maintenance, training, and modernization opportunities-continues to bolster long-term cash flow generation and earnings stability, offering downside protection if the market currently undervalues forward earnings and cash flow durability.

Huntington Ingalls Industries Earnings and Revenue Growth

Huntington Ingalls Industries Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Huntington Ingalls Industries's revenue will grow by 5.4% annually over the next 3 years.
Analysts assume that profit margins will increase from 4.5% today to 5.8% in 3 years time.
Analysts expect earnings to reach $785.0 million (and earnings per share of $19.95) by about September 2028, up from $525.0 million today. However, there is some disagreement amongst the analysts with the more bullish ones expecting earnings as high as $869.1 million.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 18.0x on those 2028 earnings, down from 20.0x today. This future PE is lower than the current PE for the US Aerospace & Defense industry at 34.4x.
Analysts expect the number of shares outstanding to grow by 0.28% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.24%, as per the Simply Wall St company report.

Huntington Ingalls Industries Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Dependence on major contract awards (e.g., Virginia-class Block VI and Columbia Build II submarines) introduces risk: if timing for these large programs slips further or awards are delayed into future years, it would negatively impact revenue visibility, near-term earnings growth, and could create quarterly revenue/EPS volatility.
Persistent supply chain fragility, particularly for critical equipment on major ships like CVN 80, continues to cause schedule delays-if not fully resolved, this could impede throughput improvements, escalate costs, and erode segment operating margins over the long term.
Labor market pressures remain a structural challenge: although recent wage increases and improved hiring/retention trends are encouraging, HII's long-term growth is still exposed to industry-wide skilled labor shortages, potentially driving sustained wage inflation and constraining margin expansion.
Heavy fixed costs and high capital intensity at HII's shipyards risk underutilization if defense priorities eventually shift away from large manned vessels (as the industry evolves toward unmanned/autonomous platforms or cyber capabilities), limiting asset turnover and weighing on long-term returns on invested capital.
Political and fiscal uncertainty-particularly rising government debt and pressure on U.S. federal budgets-creates the risk of reduced shipbuilding funding or greater program scrutiny in future years, which could constrain backlog growth, depress revenues, and pressure free cash flow if support for defense spending wanes.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $285.8 for Huntington Ingalls Industries based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $324.0, and the most bearish reporting a price target of just $221.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $13.6 billion, earnings will come to $785.0 million, and it would be trading on a PE ratio of 18.0x, assuming you use a discount rate of 8.2%.
Given the current share price of $267.07, the analyst price target of $285.8 is 6.6% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Analysts Nudge Huntington Ingalls Price Target Higher Amid Improved Margins and Pentagon Demand