Huntington Ingalls Stock Drops on Negative Cash Flow Outlook

Key Developments

U.S. military shipbuilder Huntington Ingalls Industries projects a negative free cash flow for the current quarter, causing its shares to fall 11 percent. This forecast overshadowed a strong fourth-quarter report where profit reached $4.04 per share, beating analyst estimates of $3.88.

Financial Overview

The negative cash flow represents a use of approximately $600 million as a prior working capital benefit unwinds. Despite this projection, fourth-quarter revenue increased 15.7 percent to $3.48 billion, surpassing estimates. For the full year, Huntington Ingalls expects free cash flow between $500 million and $600 million.

Market Reaction and Outlook

Analysts noted the company's 2026 guidance, which includes a shipbuilding operating margin between 5.5 and 6.5 percent, was soft. This conservative outlook failed to clear the high bar set by investors after a strong run in the stock, leading to the sharp decline.

Summary

While Huntington Ingalls is positioned to benefit from rising global demand for military vessels, its immediate cash flow challenges and conservative long-term guidance have concerned the market. Investors will monitor the company's ability to manage working capital moving forward.

FAQ

Q: Why did Huntington Ingalls' stock fall despite beating profit estimates?
A: The stock fell primarily due to its forecast of negative free cash flow for the current quarter and a soft long-term operating forecast that disappointed investors.

Q: What was Huntington Ingalls' revenue for the fourth quarter?
A: The company reported revenue of $3.48 billion for the fourth quarter, a 15.7 percent increase from the previous year.

Source: Investing.com