Thesis
Huntington Ingalls builds the Navy's aircraft carriers, submarines and amphibious ships. Its remaining performance obligations (RPO), the contracted work it has not yet delivered, rose from $57.3 billion at June 30, 2026 (10-Q) to $86.2 billion at September 30, 2026 (10-Q). That is a $29 billion increase in one quarter.
Revenue has grown slowly: from $8.9 billion in 2019 (10-K) to $12.5 billion in 2025 (10-K), about 6% a year. RPO is now about 6.9 times 2025 revenue.
My view: a backlog this large, this suddenly, should lift revenue growth above its old 6% pace over the next year, as work on the new contracts starts.
Evidence
- RPO grew by $29 billion in the third quarter of 2026.
- Department of War announcements that Hangar matched to HII in the same quarter add up to $5.8 billion of definite awards, the largest a $5.1 billion contract for the USS Harry S. Truman (Sept. 28, 2026 announcement). The rest of the increase came from contracts that were not in those daily announcements; I have not yet identified them.
Catalysts
- The 2026 10-K and the 2027 quarterly reports: does revenue growth move above 6%?
- Whether RPO stays near its new level instead of falling back.
Risks / what would prove me wrong
- Shipyards may not have the workers or suppliers to build faster, so the backlog turns into revenue slowly.
- Fixed-price and fixed-ceiling contracts mean cost overruns reduce profit.
- I'm wrong if revenue for the four quarters ending September 30, 2027 grows 6% or less compared with the four quarters before, or if RPO falls back below $70 billion by then.
Valuation
I have no view on valuation here: this pitch is a call on revenue growth, and Hangar shows no prices. It is a student's opinion, not investment advice.