Huntington Ingalls Industries (HII) Financials

Huntington Ingalls Industries (NYSE: HII) showed a much tougher start to 2026 than the prior year, with quarterly revenue down, operating cash flow negative, and cash balances under pressure. The company is still profitable on an accounting basis, but the latest quarter points to weaker working-capital dynamics and a slower cash conversion profile than investors saw in most of 2025.

• Q1 2026 remained profitable, with net income of $149 million and EPS of $3.79.
• Gross margin held up reasonably well despite lower sales, with gross profit of $408 million on $3.10 billion of revenue.
• Interest and investment income helped support earnings, contributing $53 million in the quarter.
• The balance sheet still shows substantial equity, with total common equity of $5.15 billion.
• Debt looked relatively stable in Q1 2026, with $2.7 billion of long-term debt and no short-term debt reported.
• Inventory and receivables were both manageable, with $230 million in inventory and $406 million in receivables.
• HII continues to pay a meaningful dividend, at $1.38 per share in Q1 2026.
• Revenue fell 10.8% year over year from $3.48 billion in Q4 2025 to $3.10 billion in Q1 2026.
• Operating cash flow was a major weak spot, coming in at negative $390 million versus positive $650 million in Q4 2025 and positive $823 million in Q2 2025.
• Cash declined sharply, with cash and equivalents down to $216 million from $312 million at the end of Q3 2025 and $831 million at year-end 2024.

Looking at the last several years, HII has generally been a profitable defense contractor with steady quarterly earnings in the $100 million to $170 million range and periodic stronger quarters. But cash flow has been volatile. In 2025, the company posted strong operating cash flow in Q2 and Q4, yet Q1 2026 reversed that trend with a large working-capital drain. That suggests investors should pay close attention to contract timing, milestone payments, and changes in receivables or deferred revenue.

On the income statement, HII has kept margins fairly resilient. Revenue in 2025 generally ran above 2024 levels, and operating income stayed positive across the periods shown. However, Q1 2026 revenue and profit both declined from the prior quarter, which may indicate some near-term project mix or timing pressure.

The balance sheet remains serviceable, but leverage is still meaningful. Total liabilities were $7.39 billion at Q1 2026, compared with $5.15 billion in equity. That is not alarming for a capital-intensive defense business, but it does leave less room for error if cash generation weakens further.

Bottom line: HII still looks like a consistently profitable defense name, but the latest quarter raises a caution flag because earnings held up while cash flow deteriorated badly. For retail investors, the key question is whether Q1 2026 was just a timing issue or the start of a more persistent cash conversion problem.