Shipbuilding Stock Rides Navy Contract Wave

Author

Adam Garcia
June 10, 2025

Huntington Ingalls Industries (NYSE: HII) is a defense stock heavy hitter despite its modest market cap ($8.95 billion at last count), cranking out nuclear submarines and aircraft carriers for the U.S. Navy. 

First-quarter 2025’s steady profits and a April submarine contract win signal breakout momentum, making the current price a decent entry point despite a moderate upside gap consensus. 

Outpacing peers like General Dynamics (NYSE: GD), Huntington’s ironclad Navy ties and shipyard upgrades position it to crush the ballooning defense market.

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Defense Budget Boom Sparks Shipbuilding Surge…

Geopolitical heat and AI-driven warfare are juicing U.S. defense spending, with the 2025 budget hitting $886 billion, up 4% from 2024. Navy shipbuilding, a $33 billion slice, will grow 3% yearly through 2030, fueled by tensions in the Indo-Pacific and Russia’s moves. 

The Navy’s push for 355 ships by 2045, including 12 carriers and 66 submarines, demands $250 billion in new builds. Huntington is uniquely positioned to fill that gap, with its Virginia and Columbia-class submarine programs, plus unmanned vessel R&D, riding this wave, with 70% of Navy contracts tied to long-cycle ships. 

Tariffs on Chinese components could bump costs, but domestic sourcing mandates shield Huntington’s yards. A 2.5% defense budget CAGR through 2030 ensures steady cash flow for shipbuilders like Huntington.

Action: Grab shares to bank on defense spending spikes. Watch 2025 Navy budget talks and unmanned vessel contracts.

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… And a Nuclear Push Powers Huntington’s Growth

The U.S. Navy’s $2 billion investment in advanced nuclear tech boosts Virginia-class and Columbia-class subs, where Huntington delivers 23% and 22% of each $9 billion vessel. Enhanced reactor efficiency cuts maintenance costs by 10%, extending sub lifecycles to 40 years. 

Rising global demand for stealthy nuclear subs adds $15 billion to Huntington’s backlog through 2040. And, with shipyard upgrades funded by the April 30, 2025, $10 billion contract, Huntington’s set to crank out subs faster, juicing profits by 5% or more annually.

Operational Overview and Recent Earnings

Huntington’s shipbuilding segment (80% of sales) churns out nuclear submarines, aircraft carriers, and destroyers, with mission tech adding 22%. In Q1 2025, revenue slipped 2.5% to $2.7 billion, hit by USS Enterprise supply chain snags, but operating profit held at $171 million, boosting margins to 6.3%. 

Ingalls and Newport News yards hit 7.2% and 6.1% margins, up from Q4 2024. A $10 billion Navy contract for two Virginia-class submarines, signed April 30, sparked a 5% stock pop. 

Free cash flow dipped to $50 million, down 10%, but contract visibility keeps it steady.

Action: Track Q2 2025 results for Enterprise build progress and mission tech growth, though supply chain issues could slow progress somewhat.

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Strategic Positioning and Competitive Edge

Huntington rules the $50 billion U.S. shipbuilding market, as the sole builder of nuclear aircraft carriers and a duopoly player in submarines with General Dynamics. Its Ingalls and Newport News yards, backed by a $2 billion Navy-funded upgrade, churn out Virginia-class subs ($9 billion each) and Arleigh Burke destroyers. 

A 35-year ship lifecycle and block contracts lock in $30 billion in backlog, with Columbia-class subs adding $20 billion by 2040. A $500 million R&D budget fuels unmanned ships, targeting a $5 billion market by 2030. W

ith 80% of sales from the Navy and a 5% sales CAGR forecast through 2029, double the industry’s pace, Huntington’s grip on long-cycle contracts keeps rivals at bay

Action: Monitor submarine contract awards and unmanned tech progress in 2025 filings.

Bear Case

  • Budget fights could trim $10 billion from Navy spending, slowing ship orders.

  • Supply chain woes could delay $500 million in deliveries. 

  • IT services bets, outside core shipbuilding, risks losses if the new initiatives aren’t lucrative. 

  • A drop in carrier count could dent revenue. 

  • Specialized labor shortages might hike costs, squeezing margins.

Action: Hedge with big defense players like Lockheed Martin (NYSE: LMT) and aerospace ETFs to dodge budget and supply risks.

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Navy Contracts Anchor Blockbuster Gains

A gritty Q1 2025, with flat profits and a 6.3% margin, shows Huntington’s muscle despite supply snags. A 5% sales CAGR forecast, powered by $30 billion in Navy contracts and shipyard upgrades, taps a $600 billion defense market. 

With $2.8 billion in debt at 2.8 times EBITDA and $500 million in free cash flow, Huntington’s set to soar, pushing margins to 7.5% by 2029. Its carrier monopoly and sub duopoly, with orders through 2050, scream stability, creating a steady growth opportunity for defense sector investors.

That’s all for today. Thank you for reading. If you have any feedback, please reply to this email.

Best Regards,

— Adam Garcia
Elite Trade Club

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