Direct Answer
Huntington Ingalls Industries is America's largest military shipbuilder, the sole builder of nuclear aircraft carriers, and one of two builders of nuclear submarines, with decades of backlog visibility but challenges managing complex multi-year programs and skilled labor supply.
Huntington Ingalls Industries (HII): America's Largest Naval Shipbuilder
Company Snapshot
| Ticker | HII |
|---|---|
| Exchange | NYSE |
| Sector / Industry | Industrials / Aerospace and Defense |
| Headquarters | Newport News, VA |
| Founded | 2011 (spun off from Northrop Grumman; shipyard origins 1886) |
| Revenue (FY2024 approx.) | ~$11.5B |
| CIK | 0001501585 |
| SEC EDGAR | View filings |
What does Huntington Ingalls Industries do?
Huntington Ingalls Industries is the largest military shipbuilder in the United States and one of the most strategically critical defense contractors in the country. HII was spun off from Northrop Grumman in March 2011, creating a standalone public company focused on naval shipbuilding and defense services. However, the company's shipyard operations trace back to 1886 at Newport News Shipbuilding.
HII operates through two major shipbuilding divisions plus a growing services segment. The company's workforce of approximately 44,000-45,000 employees is among the largest of any defense contractor, reflecting the highly labor-intensive nature of building large naval vessels.
Business divisions
HII operates three reportable segments:
- Newport News Shipbuilding: Located in Newport News, Virginia, this is the only U.S. facility capable of building nuclear-powered aircraft carriers. It builds and refuels/overhauls CVN-class Nimitz and Gerald R. Ford-class carriers. It is also one of two U.S. builders of Virginia-class nuclear-powered attack submarines. Revenue from Newport News represents roughly 40-45% of HII's total.
- Ingalls Shipbuilding: Located in Pascagoula, Mississippi, Ingalls builds surface combatants including DDG-51 Arleigh Burke-class guided-missile destroyers, LPD-17 San Antonio-class amphibious transport docks, LHA-6 America-class amphibious assault ships, and National Security Cutters for the U.S. Coast Guard. Revenue represents roughly 30-35% of HII's total.
- Mission Technologies: Defense services including cybersecurity, cloud, unmanned systems, AI/machine learning, and nuclear operations. Built through acquisitions including Alion Science and Technology (~$1.65B, 2021). Represents approximately 20-25% of HII's total revenue.
Sole-source status and strategic importance
Newport News Shipbuilding's position as the sole builder of nuclear aircraft carriers is a defining characteristic of HII's investment profile. No other facility in the world outside Russia can build nuclear-powered supercarriers, and no other U.S. facility has the dry docks, equipment, nuclear-certified workforce, and security infrastructure required. A Gerald R. Ford-class carrier (CVN-80 and beyond) costs approximately $13B per hull and takes 5-7 years to construct.
For nuclear submarines, HII shares the market with General Dynamics' Electric Boat division under the Virginia-class program, which targets two submarines per year. HII builds modules for a portion of each submarine in addition to complete hulls. The AUKUS trilateral security pact (Australia, UK, U.S.) creates potential demand for additional submarine production capacity.
Labor and cost challenges
Shipbuilding is extraordinarily labor-intensive. Building a nuclear aircraft carrier requires thousands of skilled workers including nuclear-certified welders, pipefitters, electricians, and engineers who must maintain security clearances. Training and certifying nuclear trades takes years, creating significant constraints on production rate increases. Post-COVID labor market tightness and competition with other defense contractors for skilled trades contributed to cost pressure and schedule slippage across HII programs in 2021-2024. HII has worked to accelerate hiring and training pipelines but acknowledges these are multi-year challenges given the specialized nature of the workforce.
Frequently asked questions
How does Huntington Ingalls Industries make money?
Huntington Ingalls earns revenue through long-term cost-plus and fixed-price government contracts for naval ship construction and maintenance, plus a growing defense mission systems business. Ingalls Shipbuilding (Pascagoula, MS) builds surface combatants including DDG-51 Arleigh Burke-class destroyers, San Antonio-class amphibious assault ships, and National Security Cutters for the Coast Guard. Newport News Shipbuilding (Newport News, VA) is the sole builder of nuclear-powered aircraft carriers (CVN-class) and one of two builders of nuclear submarines (Virginia-class). Mission Technologies provides cybersecurity, IT, and mission systems services.
Why is Huntington Ingalls a monopoly or near-monopoly?
Newport News Shipbuilding is the only facility in the United States capable of building nuclear-powered aircraft carriers, making it a sole-source supplier for CVN construction. For nuclear submarines, only two shipyards have the capability: Newport News and General Dynamics' Electric Boat division in Groton, CT. This monopoly or duopoly position results from the enormous capital investment, specialized labor (nuclear-certified welders), security clearances, and decades of institutional knowledge required to build nuclear-capable vessels. These are not capabilities that can be replicated quickly, giving HII extraordinary long-term contract visibility.
What are cost-plus contracts and how do they affect HII's profitability?
Cost-plus contracts (formally cost-reimbursable contracts) allow a contractor to recover all allowable costs plus a negotiated fee or profit margin. For large, complex, first-of-kind programs like new carrier classes, the government uses cost-plus structures because the technical risks are too large for a contractor to price with certainty. HII's margins under cost-plus are relatively stable but modest (typically 7-10% operating margins). Fixed-price contracts (more common for repeat destroyer and submarine hulls) can generate higher margins if costs are controlled below the fixed price, but also carry more risk if costs overrun. HII has experienced cost overruns on certain programs, particularly during labor ramp-ups or when inflation exceeded estimates.
What is HII's Mission Technologies segment?
Mission Technologies (formerly Technical Solutions) is HII's defense services and IT business, providing cybersecurity, cloud computing, artificial intelligence/machine learning, unmanned systems, and nuclear operations support to U.S. government customers. HII built this segment through acquisitions including Alion Science and Technology (acquired 2021 for ~$1.65B) and others. Mission Technologies is intended to diversify HII's revenue away from lumpy shipbuilding contracts into higher-margin, more recurring government services. The segment generated approximately $2.5-3B in annual revenue as of 2024.
What are the main risks for HII investors?
Key risks include: U.S. defense budget cuts reducing shipbuilding authorizations and procurement rates; labor shortages and cost overruns on complex programs, particularly for skilled nuclear trades (which take years to certify); schedule delays on carrier and submarine construction that defer revenue recognition; fixed-price contract losses when inflation or technical complexity exceeds estimates; concentration of revenue in a single customer (the U.S. Navy and Coast Guard); and the long program cycles (a nuclear carrier takes 5-7 years to build) that create cash flow timing challenges.