Bank of America Upgrades Huntington Ingalls to Neutral Amid Stronger Shipbuilding Fundamentals
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 3 days ago
0mins
Should l Buy HII?
Source: seekingalpha
- Rating Upgrade: Bank of America upgraded Huntington Ingalls (HII) from Underperform to Neutral, reflecting improved fundamentals in the U.S. shipbuilding industry and increased Navy budgets that are expected to mitigate execution risks at the company's shipyards.
- Price Target Increase: Analyst Ronald Epstein raised the price target from $300 to $400, implying modest upside from recent levels, which reflects a higher valuation multiple tied to a strong macro backdrop for naval construction.
- Defense Budget Boost: The fiscal 2026 defense budget proposal includes $27.2 billion for 17 ships, with speculation that fiscal 2027 defense spending could exceed $1.2 trillion, positioning Huntington Ingalls to benefit from increased Navy procurement, particularly in upcoming contracts for submarines and frigates.
- Improving Execution Risks: While macro trends have improved, Huntington Ingalls still faces challenges such as labor shortages and supply chain constraints; management plans to boost shipyard throughput by 15% in 2026, with free cash flow projected to recover from $530 million in 2026 to $642 million in 2027.
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Analyst Views on HII
Wall Street analysts forecast HII stock price to fall
6 Analyst Rating
4 Buy
1 Hold
1 Sell
Moderate Buy
Current: 406.760
Low
300.00
Averages
344.80
High
376.00
Current: 406.760
Low
300.00
Averages
344.80
High
376.00
About HII
Huntington Ingalls Industries, Inc. is a global, all-domain defense provider. The Company delivers ships and all-domain solutions in service of the nation. It delivers critical capabilities extending from ships to unmanned systems, cyber, ISR, AI/ML and synthetic training. It operates through three segments: Ingalls Shipbuilding (Ingalls), Newport News Shipbuilding (Newport News), and Mission Technologies. Through its Ingalls segment, the Company designs and constructs non-nuclear ships for the United States Navy and Coast Guard, including amphibious assault ships, expeditionary warfare ships, surface combatants, and national security cutters (NSC). The core business of its Newport News segment is designing and constructing nuclear-powered aircraft carriers and submarines, and the refueling and overhaul and the inactivation of nuclear-powered aircraft carriers. The Company’s Mission Technologies segment develops integrated solutions that enable connected, all-domain force.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Price Target Increase: Analyst Ronald Epstein raised the price target from $300 to $400, implying modest upside from recent levels, which reflects a higher valuation multiple tied to a strong macro backdrop for naval construction.
- Defense Budget Boost: The fiscal 2026 defense budget proposal includes $27.2 billion for 17 ships, with speculation that fiscal 2027 defense spending could exceed $1.2 trillion, positioning Huntington Ingalls to benefit from increased Navy procurement, particularly in upcoming contracts for submarines and frigates.
- Improving Execution Risks: While macro trends have improved, Huntington Ingalls still faces challenges such as labor shortages and supply chain constraints; management plans to boost shipyard throughput by 15% in 2026, with free cash flow projected to recover from $530 million in 2026 to $642 million in 2027.
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- New Icebreaker Contracts: The U.S. Coast Guard has awarded contracts for the construction of 11 new Arctic Security Cutters, with a total investment of approximately $9 billion aimed at addressing the icebreaker deficit, although major U.S. shipbuilders are excluded from these contracts.
- Construction Plan Details: The first six new ships will be built by Rauma Marine Constructions in Finland and Bollinger Shipyards in Louisiana, with the first delivery expected in 2028, reflecting a shift towards international collaboration in shipbuilding.
- Market Potential and Investment Opportunities: While the companies involved are privately owned, the total contract value of $14 billion could lead Bollinger to consider going public, presenting potential investment opportunities for those looking to profit from these significant contracts.
See More
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- Current Fleet Status: A decade ago, the U.S. had only two icebreakers, now increased to three, yet still significantly lagging behind Russia's fleet of 40, highlighting a critical gap in U.S. polar navigation capabilities.
- New Contract Awards: The U.S. Coast Guard recently awarded contracts for the construction of 11 new Arctic Security Cutters, with a total investment of approximately $9 billion, indicating a strong governmental commitment to enhancing polar capabilities.
- Construction Plan Details: Six of these vessels will be built by Rauma Marine Constructions in Finland and Bollinger Shipyards in Louisiana, with the first expected delivery in 2028, thereby strengthening U.S. strategic presence in the Arctic region.
- Market Impact and Investment Opportunities: Although the total contract value reaches $14 billion and Bollinger may consider an IPO, currently all involved companies are privately held, prompting investors to monitor future market developments for potential opportunities.
See More
Congress Passes $839 Billion Defense Budget for 2026
- Defense Budget Increase: Congress has passed an $839 billion defense spending bill, marking the Pentagon's first full-year appropriation since fiscal 2024, with $9.8 billion specifically allocated for the development of autonomous and unmanned systems, highlighting a commitment to modern military technology.
- AI Market Outlook: The global AI market in defense and aerospace is projected to grow from $4.2 billion in 2026 to $42.8 billion by 2036, with a compound annual growth rate of 26.4%, indicating that defense budgets are driving rapid advancements in related technologies.
- Accelerated Corporate Investment: The DoD's IT budget for fiscal 2026 reached $66 billion, an increase of $1.8 billion from 2025, with every service branch boosting its AI allocations, and the Navy's AI spending alone rising by 22.7% year-over-year, reflecting a strong demand for intelligent technologies.
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- AI Market Outlook: The global AI market in defense and aerospace is projected to grow from $4.2 billion in 2026 to $42.8 billion by 2036, at a compound annual growth rate of 26.4%, indicating a rapid acceleration in demand for autonomous platforms and intelligent command systems, attracting significant institutional capital.
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See More
Bank of America Upgrades Huntington Ingalls to Neutral Amid Stronger Shipbuilding Fundamentals
- Rating Upgrade: Bank of America upgraded Huntington Ingalls (HII) from Underperform to Neutral, reflecting improved fundamentals in the U.S. shipbuilding industry and increased Navy budgets that are expected to mitigate execution risks at the company's shipyards.
- Price Target Increase: Analyst Ronald Epstein raised the price target from $300 to $400, implying modest upside from recent levels, which reflects a higher valuation multiple tied to a strong macro backdrop for naval construction.
- Defense Budget Boost: The fiscal 2026 defense budget proposal includes $27.2 billion for 17 ships, with speculation that fiscal 2027 defense spending could exceed $1.2 trillion, positioning Huntington Ingalls to benefit from increased Navy procurement, particularly in upcoming contracts for submarines and frigates.
- Improving Execution Risks: While macro trends have improved, Huntington Ingalls still faces challenges such as labor shortages and supply chain constraints; management plans to boost shipyard throughput by 15% in 2026, with free cash flow projected to recover from $530 million in 2026 to $642 million in 2027.
See More
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See More
