BofA Securities on Thursday moved Huntington Ingalls Industries (NYSE: HII) off its Underperform list and assigned a Neutral rating, raising the firm's price target to $400 from $300. The newly stated target sits slightly above HII's recent trading level of $392.70. The stock has produced a 145.82% total return over the past 12 months.
The upgrade reflects BofA's view that fundamentals across the shipbuilding sector have strengthened. The firm pointed to a higher multiple derived from relative price-to-free-cash-flow metrics for 2027 estimates versus the 2026 estimates it used previously. That multiple expansion underpins the more constructive stance despite company-specific performance issues.
BofA acknowledged that macro strength in the shipbuilding market has largely outweighed margin compression and execution challenges at HII's yards. The analyst team highlighted expectations for increased government funding to help alleviate labor shortages and supply chain bottlenecks that have contributed to operating pressure. HII's reported gross profit margin of 12.7% remains a reflection of those ongoing challenges. The company continues to carry a moderate leverage profile, with a reported debt-to-equity ratio of 0.58.
The firm also noted that HII has been making progress resolving problem contracts that date back to the pre-COVID period. BofA identified several potential growth drivers that could support future momentum, including awards related to Virginia Class Block VI submarines, the maturation of the company's new frigate program, and finalization of plans for the Trump-class battleship. These catalysts have coincided with significant share-price appreciation - HII has returned 47.9% over the last six months according to the figures cited.
Execution continues to be flagged as a risk by BofA, but the analyst believes that expansion in HII's addressable markets provides a counterweight to those operational concerns. Across the analyst community, price targets for the $15.41 billion market-cap company span from $292 to $465, underscoring divergent views on the balance between execution risk and growth opportunity.
Recent financial results
Huntington Ingalls reported fourth-quarter 2025 results that exceeded consensus expectations. The company posted earnings per share of $4.04, ahead of the consensus estimate of $3.84. Revenue for the quarter was $3.5 billion, beating the anticipated $3.09 billion. Following those results, Bernstein increased its price target to $421 from $412 while retaining a Market Perform rating on the stock.
Despite the stronger-than-expected quarter and the subsequent price-target revision, HII's shares experienced a notable decline in pre-market trading, indicating a mixed market reaction to the earnings release and forward outlook.
Context and immediate implications
The combination of a sector-driven multiple re-rating and specific program awards has driven the recent reassessment by at least one major sell-side firm. While BofA's upgrade to Neutral signals a more positive stance on valuation relative to the firm's prior view, the firm explicitly continues to weigh yard-level execution and margin pressures when forming its outlook.
Investors and market participants will likely monitor the resolution of legacy contract issues, the trajectory of government funding and program awards, and HII's ability to convert backlog into consistent margin improvement as factors that will determine whether the more favorable sector view translates into sustained outperformance at the company level.