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Additional Reading from MarketBeat This Defense Stock Has a $57B Backlog and New AI TailwindsWritten by Gabriel Osorio-Mazilli. Published 10/24/2025. 
Key Points - Huntington Ingalls' stock now trades near a 52-week high, although its market capitalization is significantly below the sector average.
- Government defense spending has led to an increase in the company's backlog, boosting EPS forecasts.
- AI implementation could raise margins to new highs, justifying the continuation of its bullish price action.
In the world of defense investing, some of the best opportunities come not from discovering new names, but from re-evaluating essential companies that Wall Street may be underpricing relative to their strategic value. One such case is Huntington Ingalls Industries (NYSE: HII), a major player in the U.S. defense sector with a market cap of $11.5 billion. With geopolitical tensions rising between the United States, China, and the Middle East, Huntington Ingalls stands to benefit from expanding government defense budgets. Record backlogs, artificial intelligence (AI) adoption, and strong defense spending together create a rare setup for long-term earnings growth and valuation expansion, even though the stock is trading near its highs. Huntington Ingalls Is at the Center of Naval Power The United States Navy is one of the most extensive and well-equipped naval forces in the world. The 2025 defense budget stands just under $850 billion, with roughly $40 billion dedicated to aircraft carriers and related naval programs. These allocations translate to direct revenue opportunities for contractors that supply critical military infrastructure, like Huntington Ingalls. Despite being the largest military shipbuilder in the United States and a major supplier of aircraft carriers, destroyers, and submarines to the Navy, the company trades at a modest valuation relative to its strategic importance. In its most recent quarter, Huntington Ingalls secured $11.9 billion in new contract awards, boosting its backlog to a record $56.9 billion. These backlog levels, the highest since the COVID-19 pandemic, provide a long runway of predictable revenue. One factor that could significantly accelerate value realization is AI integration. How Artificial Intelligence Is Changing the Game Management says Huntington Ingalls' AI implementation is set "to accelerate shipbuilding throughout," which could translate into faster production cycles, lower costs, and expanded margins. AI-driven efficiencies may also turn long-lead government contracts into more immediate earnings drivers. That potential helps explain why HII is up 48.1% year-to-date and trading at about 95% of its 52-week high, despite the long timelines typically associated with defense programs. Analysts May Still Be Behind the Curve It's understandable that some investors hesitate to buy a stock near its 52-week high, particularly when analyst ratings and targets lag behind recent momentum. Investors will soon learn whether the company meets or beats the Q3 analyst consensus forecast of $3.40 when the report is expected on Oct. 30. The MarketBeat consensus Q4 earnings per share (EPS) forecast for HII is $4.24, roughly 10% higher than the Q2 reported EPS of $3.86. Notably, HII's Q2 EPS beat the consensus estimate of $3.23 by a wide margin. Those repeated underestimates suggest analysts may still be too conservative, especially if continued AI gains compress production timelines and improve margins. If these trends persist, Huntington Ingalls could see upside EPS revisions in future quarters—an important catalyst for further stock appreciation. Institutional investors appear to recognize this potential. In August 2025, Bank of America boosted its stake in Huntington Ingalls by 4%, bringing its position to $160.9 million, or about 1.7% ownership. That move signals conviction in HII's long-term trajectory, given a business model that combines national importance with improving financial returns. Huntington Ingalls: A Strategic Play on Defense and AI Huntington Ingalls sits at the intersection of national defense urgency and technological transformation. A roughly $57 billion backlog, a proven track record as the Navy's shipbuilder of choice, and AI-powered efficiency gains position the company as a rare mix of stability, growth, and upside surprise potential. For investors who can look beyond short-term headlines, HII remains a compelling opportunity even at current share prices.
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