Thomas E. Stiehle
Executive Vice President & Chief Financial Officer at Huntington Ingalls Industries
Thanks, Chris, and good morning.
Today, I'll review our fourth quarter and full year results and also provide our outlook for 2024. For more detail on the segment results, please refer to the earnings release issued this morning and posted to our website.
Beginning with our consolidated fourth quarter results on Slide 4. Our Q4 revenues of $3.2 billion increased approximately 13% compared to the same period last year. This growth was driven primarily by higher year-over-year revenue at all 3 segments, leading to record quarterly revenue for HII. Operating income for the quarter of $312 million increased by $207 million or 197% from the fourth quarter of 2022, an operating margin of 9.8% compared to margin of 3.7% in the prior year period, up 609 basis points. The increase in operating margin was primarily due to higher segment operating income. Net earnings in the quarter were $274 million compared to $123 million in the fourth quarter of last year, up 123%. Diluted earnings per share in the quarter was $6.90 compared to $3.07 in the fourth quarter of the previous year.
Moving to our consolidated results for the full year. Revenues were a record $11.5 billion for the year, a significant increase of 7.3% from 2022. The improvement was driven by strong year-over-year growth at all 3 segments. Operating income for the year was $781 million and operating margin was 6.8%. This compares to operating income of $565 million and operating margin of 5.3% in 2022. The operating income growth was primarily driven by year-over-year improvement in segment operating income at all 3 segments. Net earnings for the year were $681 million, compared to $579 million in 2022, up 17.6% and diluted earnings per share were $17.07 compared to $14.44 in 2022, up 18.2%.
For segment results on Slide 5, Ingalls revenues of $2.8 billion in 2023, increased $182 million or 7.1% from 2022, driven primarily by higher volumes in surface combatants and amphibious assault ships partially offset by lower NSC program revenues. Ingalls' operating income of $362 million and margin of 13.2% in 2023, both improved from 2022 results driven primarily by a $70.5 million sale of a court judgment to recover unpaid receivables for the prior repair, refurbishment and modernization of foreign-built frigates. The higher volumes that I just mentioned and the contract incentive on DDG 129, partially offset by lower risk retirement on LPD 28 and LPD 30 than the prior year.
At Newport News, 2023 revenues of $6.1 billion increased by $281 million or 4.8% from 2022, primarily due to higher volumes in aircraft carrier construction and engineering and submarines, and partially offset by lower revenues in the RCOH program and naval nuclear support services. Newport News 2023 operating income of $379 million increased $22 million from 2022 and margin of 6.2% was relatively consistent with 2022 performance. The increase was driven by higher volumes I just discussed and a revenue adjustment on CVN 73, partially offset by contract incentives on the Columbia class submarine program in 2022. Shipbuilding margin for 2023 was 8.3%.
At Mission Technologies, 2023 revenues of $2.7 billion increased $312 million or 13.1% from 2022, primarily driven by higher volumes in C5 ISR and cyber, electronic, warfare and space contracts. Mission Technologies 2023 operating income of $101 million and segment operating margin of 3.7%, both improved operating income of $63 million and segment operating margin of 2.6% in 2022, driven primarily by a $49.5 million settlement of representations and warranties insurance claim relating to the acquisition of Hydroid and the higher volumes I described, partially offset by a contract loss and lower equity income due to the sale of a joint venture. Mission Technologies 2023 results included approximately $109 million of amortization of purchased intangible assets compared to approximately $120 million in 2022. Mission Technologies EBITDA margin for 2023 was 8.6%.
Turning to cash. 2023 free cash flow was $692 million, handily beating the guidance due to strong year-end collections as well as benefiting from the sale of the frigate court judgment and settlement of the reps and warranty insurance claims I've highlighted. During the year, the company reduced debt by $480 million, invested $278 million in capital expenditures, paid $200 million in dividends and used $75 million to repurchase shares, while ending 2023 with $430 million in cash on hand and liquidity of approximately $1.9 billion. Net capital expenditures finished the year at 2.4% of revenues, just under 2022's value of 2.5%. Cash contributions to our pension and other postretirement benefit plans totaled $44 million in 2023.
Our pension outlook for 2024 has improved from the update we provided in November, given the better-than-expected returns to assets, partially offset by a decrease in discount rates since that time. Asset returns for 2023 were 12.3%. Pension expectations for 2025 through 2027 have been updated. And similar to the update we provided for 2024 last quarter, the fast benefit has increased from our last update, given the more immediate recognition of the positive asset returns experienced in 2023. This is partially offset by the impact of the lower discount rate. We've also provided an initial view of our 2028 expectations.
Turning to Slide 7 of our financial outlook for 2024. Given backlog growth performance in 2023 and the strong demand for our products and services, we are now forecasting mid- to long-term HII revenue growth of 4-plus percent. For shipbuilding mid- to long-term forecast revenue growth has increased from 3% to approximately 4%, although growth in 2024 will be tepid due to the outperformance in 2023. Accordingly, we are forecasting 2024 shipbuilding revenue between $8.8 billion and $9.1 billion. For 2024, we expect shipbuilding operating margin to be between 7.6% and 7.8% as we continue to target incremental margin improvement.
For Mission Technologies, we continue to expect approximately 5% mid- to long-term top line growth. And again, due to the 2023 outperformance driven by approximately $80 million of material timing. We expect tempered growth for FY '24, forecasting revenue between $2.7 billion and $2.75 billion. And we expect Mission Technologies operating margins to be between 3% and 3.5% and EBITDA margins to be between 8% and 8.5%. In 2024, amortization and purchased intangible assets is expected to total approximately $109 million, of which $99 million is attributable to Mission Technologies. We expect first quarter revenues of approximately $2.2 billion for shipbuilding and $650 million for Mission Technologies, with shipbuilding operating margin near 7% and Mission Technologies operating margin near 2.5%.
Moving on to capital expenditures. As we've discussed in prior quarters, we continue to see the long-term capital expenditure rate of 1.5% to 2% of general sustainment. In the near term, given the significant demand in submarine construction, we are partnering with our Navy customer to invest in expanding our shipbuilding capacity and throughput. The investment is expected to drive capex to approximately 5% on average for the next 3 years, with 2024 targeted to be approximately 5.3% of sales. I will note that the sustainable free cash flow levels we've previously discussed are not expected to be impacted by this due to customer investment, evidenced by the projected free cash flow growth over the next 5 years, I'll provide shortly. Additionally, on Slide 7, we have provided our updated outlook for a number of other discrete items to assist with your modeling.
Moving on to Slide 8. We have provided an updated view of our free cash flow outlook for 2024 of $600 million to $700 million, ending our prior 5-year free cash flow projection period with an estimate of $3 billion, up from our prior estimate of $2.9 billion. I'm also pleased to provide a free cash flow outlook for the next 5 years or for FY '24 to '28 of approximately $3.6 billion. I would note that these forecasts did not include Section 174 deferral, which if it occurs, would be a tailwind to approximately $150 million to $200 million in 2024.
On Slide 9, we provided our capital allocation prioritization model unchanged from previous discussions, but updated for current events. We continue to remain committed to an investment-grade rating and have reduced our leverage ratio to under 2 turns at the end of 2023, a year earlier than planned. In addition, we finished paying off our $650 million term loan in January of 2024, which concludes our debt repayment prioritization while securing our investment-grade ratings and credit metrics. In 2024, we expect to return approximately $500 million cash flow to shareholders through dividends and share repurchases. Lastly, on this slide, the Board has approved a revision to our share repurchase program in both term and amount resulting in available share repurchase authorization of $1.5 billion through 2028.
To close on my remarks, the company's mainstay programs are well supported in demand, and MT's growth success continues to expand and diversify our portfolio. Our future is bright and within our control by executing on our current production contracts and capitalizing on the growth demand for HII products and services. We've exceeded our 2023 financial guidance metrics in terms of revenue, profitability and free cash flow while investing in our programs to facilitate growth and throughput. Additionally, we've strengthened our balance sheet, paying down debt and lowering our leverage ratio. Lastly, fine-tuned the HII investment thesis on the last page of the earnings presentation, focusing on the portfolio strength and visibility, execution and growth and free cash flow expansion driving our current and future capital allocation commitments.
With that, I'll turn the call back over to Christie for Q&A.
