US military shipbuilder Huntington Ingalls said on Thursday that it had expected free cash flow for the current quarter to be negative, despite beating quarterly profit estimates, sending its shares down 11 per cent at midday.
CEO Chris Kastner said on a post-earnings call that the negative cash flow represented use of about $600 million, "as some of the fourth-quarter working capital benefit unwinds".
Rising global tensions are driving up demand for Huntington Ingalls' nuclear-powered Columbia-class submarines, and the company is also positioned to benefit from US President Donald Trump's push to expand the country's shipbuilding to counter China.
Trump in December unveiled plans for a new, more powerful "Trump class" of battleships as part of a broader naval buildup, a move that also increases scrutiny on defence contractors over delays and cost overruns.
Huntington also expects 2026 shipbuilding revenue between $9.7 billion and $9.9 billion, and sees shipbuilding operating margin between 5.5 per cent and 6.5 per cent. Analysts said that the stock would lag on Huntington's soft operating forecast.
"The bar was higher for HII after a strong run in the stock, and while this 2026 guidance may ultimately prove conservative, our first reaction is that these results and outlook will not clear that higher bar today," J.P. Morgan analyst Seth Seifman said. The company reported a fourth-quarter profit of $4.04 per share, compared with $3.15 a year ago.
Analysts on average had expected $3.88 per share, according to data compiled by LSEG. The company said it expects full-year free cash flow between $500 million and $600 million.
Total revenue for the quarter ended December 31 rose 15.7 per cent to $3.48 billion from a year ago, above the average analyst estimate of $3.1 billion.
(Reporting by Apratim Sarkar and Anshuman Tripathy in Bengaluru; Editing by Maju Samuel)
