HII 2026年第3四半期決算説明会：受注残高は862億ドルに到達、造船部門の見通しを引き上げ

主要なポイント

• HIIの2026年第3四半期の売上高は前年同期比10.8%増の約35億ドルとなりました。希薄化後EPSは前年同期の3.68ドルから5.48ドルに増加しました。
• 造船部門の売上高は、潜水艦および空母の建造量の増加、資材受領、賃金投資、アウトソーシングの拡大に支えられ、13.9%増の28億ドルに増加しました。
• 当四半期の新規受注額は324億ドルに達し、受注残高は862億ドルに拡大しました。これらの数値には、第4四半期に計上予定である51億ドル規模の空母「ハリー・S・トルーマン（CVN 75）」の燃料補給・大規模改修（RCOH）契約は含まれていません。
• HIIは、2026年の造船部門の売上高見通しを105億ドル〜107億ドルに引き上げた一方、営業利益率の見通しは6%〜6.5%に据え置きました。
• ミッション・テクノロジーズ部門は売上高7億9,200万ドル、営業利益率9%、ブック・トゥ・ビル比率（BBレシオ）2.4倍を計上しました。HIIは同部門の通期利益率見通しを引き上げました。
• 第3四半期のフリーキャッシュフローは4億2,900万ドルでした。経営陣は、2026年および2027年の累積フリーキャッシュフローの見通し（12億ドル〜13億ドル）を再確認しました。

主要財務実績

事業および業績の動向

造船部門

ニューポート・ニューズの営業利益は、前年同期の8,000万ドルから1億3,200万ドルに増加し、営業利益率は4.9%から6.9%に改善しました。この増加は、バージニア級原子力潜水艦プログラムにおける契約調整とインセンティブ、ならびに潜水艦および空母の建造量増加を反映したものです。

ニューポート・ニューズは、コロンビア級潜水艦プログラムに関する6,500万ドルのプラス調整を含め、純累積調整額として7,200万ドルの増額を記録しました。経営陣は、インセンティブ、作業範囲、和解金、およびプログラムリスクに関する前提条件の更新により、最近のEAC（完了時総コスト見積もり）調整額が過去の水準よりも大きくなっていると説明しました。

インガルスの営業利益は前年同期の6,500万ドルから5,900万ドルに減少し、営業利益率は7.9%から6.7%に低下しました。経営陣は減益の主な要因として水上戦闘艦のパフォーマンスを挙げました。同セグメントは純累積調整額としてマイナス500万ドルを記録しました。

年初来の造船建造量は約9%増加しました。ニューポート・ニューズは経営陣の予想通りに推移した一方、インガルスでは第1四半期末近くに賃上げを実施した後の労働力回復が遅れました。HIIは両造船所で6,000人以上の造船作業員を採用し、第3四半期中にインガルスでは純増で576人の従業員を増員しました。

主要プログラムのマイルストーンは順調に推移しています。空母「ジョン・F・ケネディ（CVN 79）」は事前受領試験を完了し、2027年の最終引渡しに向けて予定通り進んでいます。潜水艦「アーカンソー（SSN 80）」は2026年の引渡しに向けて順調に進展しています。ドック型輸送揚陸艦「ハリスバーグ（LPD 30）」も今年引渡し予定であり、強襲揚陸艦「ブーゲンビル（LHA 8）」およびミサイル駆逐艦「ジェレマイア・デントン（DDG 129）」は2027年の引渡しに向けて準備が進められています。

ミッション・テクノロジーズ部門

ミッション・テクノロジーズの営業利益は前年同期の3,400万ドルから7,100万ドルに増加し、営業利益率は4.3%から9%へ拡大しました。この改善は、Romulus（ロムルス）の試験マイルストーン達成、無人システム事業の取扱高増加、および原子力・環境関連合弁事業からの持分法投資利益の増加を反映しています。

同セグメントは第3四半期に19億ドルの案件を獲得し、BBレシオ（ブック・トゥ・ビル比率）2.4倍を達成しました。主な新規受注には、22億ドル規模のStingray（スティングレイ）プログラム、Lionfish（ライオンフィッシュ）無人潜水艇の追加注文、米海軍の中型無人水上艇プログラムに基づくRomulus艦艇10隻、および3億3,200万ドル規模の5年間にわたる空軍エンタープライズ契約が含まれます。

HIIはまた、製造、試験、統合能力を増強するため、マサチューセッツ州にある自律型システム生産拠点を25%拡張しました。経営陣は、大型主要艦艇が引き続き同社のコア事業である一方、無人システムがHIIのポートフォリオにおいてより大きな割合を占めると予想していると述べました。

経営陣の業績見通し（ガイダンス）

経営陣は、2027年も造船部門の利益率が段階的に改善すると引き続き予想しています。CEOのクリストファー・キャスナー氏も、明確なスケジュールは示さなかったものの、造船事業は長期的に売上高利益率（ROS）9%〜10%を創出すべきだという長期的な見解を改めて示しました。

HIIは、約6%の複数年にわたる売上高成長シナリオを維持しました。経営陣は、通期決算発表時に売上見通しを更新すると述べました。2030年までに予想される造船売上高の約90%は、すでに契約済みです。

リスクおよび注視事項

• 年初来の造船建造量成長率は約9%にとどまり、当初の目標であった15%を下回っています。これは主にインガルスにおける労働力回復の遅れと、3隻の艦艇の同時試験が影響しています。
• ニューポート・ニューズでは、第2四半期と第3四半期に異例なほど大きなEAC（完了時総コスト見積もり）調整が発生しました。経営陣は、予期せぬ事態が発生しない限り、第4四半期以降は契約関連の調整が正常化すると見込んでいます。
• インガルスは、水上戦闘艦のパフォーマンス低下への対応と、近い将来に予定されている3隻の艦艇の引渡しに向けた施工管理への対応を続けています。
• 2027年度予算案は議会で審議中ですが、経営陣はHIIのプログラムに対して超党派の支持が存在することを指摘しています。
• 年金関連の試算は、年末の資産運用実績や割引率の影響を受けやすい状況が続いています。第3四半期までの運用リターンは約1.7%となり、割引率は同社の当初想定から約118ベーシスポイント（bp）上昇しました。
• フリゲート艦プログラムは2028年末までの進水に向けて予定通り進んでいますが、経営陣はHIIが第1四半期に契約を確保する必要があると述べました。

アナリスト質疑応答のハイライト

経営陣は、造船所の労働力は一般に地元の通勤圏内から確保されるため、全米における造船所の能力増強が人材獲得競争を大幅に激化させることはないとの考えを示しました。HIIは追加の労働力プールを活用するため、チャールストンを含む分散拠点を活用しています。

潜水艦の生産について、経営陣はニューポート・ニューズでのプラスの兆候を指摘したものの、米海軍が目標とする生産ペースへの早期回復についての予測は控えました。同社は引き続き、建造量の拡大、アウトソーシング、および分散造船に注力しています。

利益率に関して、経営陣はコロナ禍前の契約からコロナ禍後の契約へのポートフォリオの移行に伴い、造船事業の収益性とキャッシュ創出能力の両方が年々改善すると予想しています。2027年末までに、コロナ禍以降の契約による事業がポートフォリオ内でわずかに過半を占める見通しです。

経営陣は、現在の9%の建造量増加はHIIのEAC見積もり、財務見通し、およびフリーキャッシュフローガイダンスに織り込み済みであると述べました。年末までその水準にとどまったとしても、それ自体が追加のマイナス調整を引き起こすことはありません。

決算説明会文字起こし全文

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Third Quarter 2026 HII Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]

I would now like to hand the call over to Christie Thomas, Vice President of Investor Relations. Mrs. Thomas, you may begin.

Christie Thomas

Thank you, operator, and good morning, everyone. Welcome to the HII Third Quarter 2026 Conference Call. Matters discussed on today's call that constitute forward-looking statements, including our estimates regarding the company's outlook involve risks and uncertainties and reflect the company's judgment based on information available at the time of this call. These risks and uncertainties may cause our actual results to differ materially. Additional information regarding these factors is contained in today's press release and the company's SEC filings.

We will also refer to certain non-GAAP financial measures. For additional disclosures about these non-GAAP measures, including reconciliations to comparable GAAP measures, please see the slides that accompany this webcast which are available on the Investor Relations page of our website at ir.hii.com. On the call today are Chris Kastner, President and Chief Executive Officer; Andy Green, Executive Vice President and President of Mission Technologies; and Tom Stiehle, Executive Vice President and Chief Financial Officer.

Now I'll turn the call over to Chris.

Christopher Kastner

Thanks, Christie. Good morning, everyone, and thanks for joining us on today's call. This morning, we reported strong third quarter results, underscoring our focus on providing ships and mission technology solutions to our war fighters. Today, I'll begin by providing the Q3 results and highlights from Newport News and Ingalls Shipbuilding; Andy Green, President of Mission Technologies, has joined us to provide an update on recent key wins and accomplishments. -- and then Tom will give the financial details and outlook.

Starting with our results. We reported record third quarter sales of [indiscernible] and diluted earnings per share of $5.48. At approximately $2.8 billion, third quarter shipbuilding sales were 14% ahead year-over-year. This continued outperformance supports raising our 2026 shipbuilding revenue guidance to between $10.5 billion and $10.7 billion. Our portfolio turnover and throughput increases continue to drive incremental margin expansion, we are reiterating our 2026 shipbuilding margin outlook of 6% to 6.5% and the midpoint represents a 35 basis point improvement over 2025.

Turning to awards. We had an unprecedented quarter, securing over $32 billion in new contract awards driven by Block 6, Virginia class and Build 2 Columbia class submarine contract awards as well as the CVN82 long lead time materials contract. We also finalized the contract for the refueling and complex overhaul of CVN75 USS Harry S. Truman at the end of September, which will be recognized in our fourth quarter results. Mission Technologies had strong performance this quarter with revenues over $790 million, EBITDA margins of 12% and book-to-bill of 2.4x. The team is making strides across all business units, and we are raising our full year margins guidance for Mission Technologies. Andy will provide more details on the significant competitions we recently won and accomplishments we've achieved in the third quarter.

Now I'll provide highlights from the shipyards. At Newport News, CVN 79 Kennedy successfully completed preliminary acceptance trials and is on track for final ship delivery in 2027, consistent with the milestones we provided earlier this year. CVN 80 and CVN 81 continue to make progress -- and as I mentioned, we received the long lead time materials contract for CVN 82. And one day after the award of the CVN-75RCOH contract, the ship arrived at Newport News to officially begin the availability.

On Submarines, SSN 80 Arkansas, which is our last Block IV boat is progressing towards delivery later this year. At Ingalls, our team is focused on preparing 3 ships for delivery LPD 30 Harrisburg will deliver this year; and LHA 8 Buggenville and DDG 129 Jeremi Denton prepared for deliveries in 2027. Overall, as we head into year-end, all of our shipbuilding milestones remain on track for 2026 and 2027. Shipbuilding throughput has increased approximately 9% year-to-date over 2025, while Newport News is executing consistent with expectations, Ingalls has been impacted by a slower labor recovery given their wage increases were put in place near the end of the first quarter. However, we continue to see positive momentum year-to-date. We've hired over 6,000 shipbuilders across both yards. And in the third quarter, Ingalls has gained a net of 576 shipbuilders, which is their highest net increase over the past 10 quarters.

Also, we have achieved enrollment of over 800 at both our apprentice schools, which is a 14% increase over last year. We expect this continued labor ramp to positively impact throughput as we look ahead. Finally, distributed shipbuilding is meeting targeted levels, and we expect to exceed 30% growth year-over-year.

Turning to activities in Washington, the President submitted its fiscal year 2027 budget request in April, which remains under consideration by Congress. As Bill progress through both chambers, we continue to see bipartisan support for our programs reflected in the defense bills in the House and the Senate. In closing, overall, the quarter reflects strong operational execution. Our priority is a disciplined finish to the year and sustain momentum into 2027.

And now I'll turn the call over to Andy for his remarks on Mission Technologies. Andy?

Andy Green

Thank you, Chris, and good morning, everyone. It's great to join you on today's call. and Mission Technologies were proud to be part of shaping the future of Americas Seapower, by supporting and advancing the future fleet, a new paradigm for robotic and autonomous systems and integrated combat power that delivers speed, scale and resilience. Almost half of our 7,000 employees are veterans, and they know what it takes to win and how to be a partner with our Department of our customers. .

This quarter, we delivered strong performance with several major strategic contract wins. We continue to grow the top line in the quarter while also expanding operating and EBITDA margins. Year-to-date, operating margin was 7% and EBITDA margin was 10%, with total contract awards of almost $5 billion. These results reflect a better revenue mix and continued focus on execution by the entire Mission Technologies team.

Notably, we secured several strategically significant contract awards in the third quarter. In late July, we were awarded the $2.2 billion Stingray program to advance our nation's ISR capabilities across the Western Hemisphere in support of South com. Under this program, HII will deliver advanced tracking, intelligence, network services, reconnaissance and analysis. The program leverages the division's broad portfolio to strengthen operational awareness against evolving threats in the region.

Also during the quarter, we were awarded a large follow-on production order for the Navy's Lion fish UUVs, vehicles deployed for critical missions and hotspots around the world. We supplied more than 750 Remis UUVs to the Navy and our allies for almost 2 decades and more than 90% of these vehicles remain in service today. This is a testament to the effectiveness and utility of these highly advanced platforms and is why they continue to be central to the Navy's robotics and autonomous systems strategy. Building on our advanced maritime autonomy, we also received an award for 10 Romulus 150-foot USPs under the Navy's MUSV program with multiple holes already in production at our partnership yards, Brew Brothers and Alamar. This award followed a successful 2-week intensive evaluation of our robust Odyssey Autonomy suite.

To meet the accelerating demand from the Navy and Allied partners, Mission Technologies recently expanded our autonomous system production facility in Massachusetts by 25%, increasing capacity for manufacturing, testing and integration. This investment enhances our ability to deliver next-generation unmanned systems to U.S. and international customers. It strengthens the defense industrial base and it accelerates throughput of several high-priority vehicles.

Additionally, during the quarter, the Air Force awarded HII, a new $332 million 5-year contract to provide enterprise SI capabilities, including analytics and data engineering. This was a follow-on award reflecting the strong partnership we've developed with our Air Force customer.

As we expand support across the joint force, we also continued to invest in the development of containerized and palletized solutions that can be fielded on ground and sea platforms. These flexible modular systems will be able to rapidly field a wide variety of weapons and sensors, including systems such as advanced EW capabilities, directed energy, kinetic launch systems and counter-UAS systems. Another powerful example of how HII is committed to delivering adaptable, integrated and combat-ready capabilities essential to the nation's defense.

Looking ahead toward year-end, our team remains focused on operational excellence, disciplined execution and delivering the most advanced capabilities to our war fighters.

In summary, we play a critical role in strengthening national security, and we're committed to meeting our customers' needs with urgency, innovation and unwavering performance.

With that, I'll turn the call over to Tom for some remarks on our financial results and outlook. Tom?

Thomas Stiehle

Thanks, Andy, and good morning. Let me start by discussing our third quarter results, and then I'll provide some color on our expectations for the remainder of the year. For more detail, please refer to the earnings release issued this morning and posted to our website. Beginning with our consolidated results on Slide 4 of the presentation, new contract awards in the quarter totaled $32.4 billion and brought total backlog to $86.2 billion. Of note, these values do not include the award of the refueling and complex overhaul of CVN 75 USS Harry S. Truman. That contract award valued at $5.1 billion will be recognized in the fourth quarter results.

Our third quarter revenues of approximately $3.5 billion increased 10.8% compared to the same period last year. The higher revenue was largely attributable to strong year-over-year growth at both shipyards. Ingalls revenues were $876 million, and increased by 5.8% compared to the third quarter of 2025, driven primarily by higher volumes in Anphibious assault chips. Newport News revenues of $1.9 billion increased by 18.1% compared to the third quarter of 2025, driven by higher volumes across submarine and aircraft carriers. Together, shipbuilding revenue was $2.8 billion, up 13.9% year-over-year and well ahead of our guidance for the quarter as results benefited from higher-than-expected material receipts as well as the impacts of wage investments and our broader efforts to drive higher shipbuilding throughput, including increased outsourcing.

Mission Technologies awards in the third quarter totaled $1.9 billion, representing a very strong book-to-bill of 2.4x. Mission Technologies revenues of $792 million increased slightly compared to the third quarter of 2025. This was driven by growth in Unmanned Systems, partially offset by lower volumes in global security.

Moving on to Slide 5. Segment operating income of $262 million and segment operating margin of 7.4% in the third quarter of 2026 compared to $179 million and 5.6% in the third quarter of 2025. At Ingalls, segment operating income was $59 million and operating margin was 6.7% compared to $65 million and 7.9% in the third quarter of 2025. The decrease in segment operating income was driven by surface combatant performance. The third quarter net cumulative adjustment at Ingalls was negative $5 million, and none of the adjustments were individually significant.

At Newport News, segment operating income was $132 million and operating margin was 6.9% compared to $80 million and 4.9% in the third quarter of 2025. The increase in segment operating income was primarily driven by contract adjustments and incentives in the Virginia-class submarine program and higher submarine and aircraft carrier volumes.

For the third quarter of 2026, Newport News shipbuilding net cumulative adjustment was positive $72 million. The gross favorable adjustments at Newport News totaled $210 million and did include a favorable $65 million adjustment related to the Columbia Class submarine program. Gross unfavorable adjustments totaled $138 million, and no individual adjustment was significant. Second and third quarter gross EAC adjustments at Newport News have been larger than historical norm as we have updated assumptions for contract incentives, scope and settlement changes and risk and expectations across the programs.

Mission Technologies segment operating income was $71 million and operating margin was 9% compared to $34 million and 4.3% in the third quarter of 2025. The increase in segment operating income was primarily due to a successful milestone achievement related to the testing of our Romulus offering for the medium unmanned surface vessel program as well as higher volumes and unmanned systems and higher equity income from nuclear and environmental joint ventures.

For the third quarter of 2026, Mission Technologies net cumulative adjustment was a positive $9 million. None of the adjustments in the quarter were individually significant. Consolidated operating income for the quarter was $246 million, and operating margin was 7% compared to $161 million and 5% in the same period last year. The increase in operating income was driven by the favorable segment operating income that I've just reviewed as well as a more favorable noncurrent state income taxes, partially offset by a slightly larger unfavorable operating FAS/CAS adjustment.

Net earnings in the quarter were $217 million, and diluted earnings per share were $5.48, up from $145 million and $3.68 in the same period last year.

Turning to Slide 6. Cash provided by operations was $520 million in the quarter. Net capital expenditures were $91 million or 2.6% of third quarter revenues. Free cash flow in the quarter was $429 million. Free cash flow results in the quarter came in above the guidance we provided on the last earnings call, largely due to timing of receipts and disbursements between the quarters. There's no change to our free cash flow expectation for full year, but we are pleased that the third quarter performance has helped derisk fourth quarter expectations.

During the third quarter, we did not repurchase any shares. We did pay a cash dividend of $1.38 per share or $54 million in aggregate.

Turning to liquidity and the balance sheet. We ended the quarter with a cash balance of $387 million and liquidity of approximately $2.1 billion. Regarding pension, we have included an updated view for 2026 and 2027, along with the 2027 sensitivity in the appendix of today's slides. Our forecast in the early 2026 assumed asset returns of approximately 7.9% at a discount rate of approximately 5.72%. Through the end of the third quarter, discount rates have increased approximately 118 basis points and asset returns through September 30 were roughly 1.7%. Pension-related numbers are subject to year-end performance and measurement criteria.

We will provide a multiyear update of pension estimates on our fourth quarter earnings call in early 2027. I would like to highlight that our pension funded status remains strong, and that cash flow impacts related to pension changes remain minimal.

Moving on to our outlook on Slide 7. We are increasing our expectation for shipbuilding revenue for the year and reiterating our shipbuilding operating margin guidance for 2026. We now expect shipbuilding revenue between $10.5 billion and $10.7 billion, and continue to expect shipbuilding operating margin of between 6% and 6.5%. We are reiterating Mission Technologies revenue guidance range of between $3 billion and $3.2 billion. noting that the midpoint is the most likely outcome based on our view today. Given the strong performance year-to-date, we are increasing Mission Technologies margin expectations. We now expect segment operating margins to be approximately 6% and EBITDA margin to be approximately 9%.

We are making a number of other modest adjustments to income statement items, which are provided on the outlook table on Slide 7. Regarding the effective tax rate, we are reiterating our guidance of approximately 17%, which includes the impact of a favorable research and development tax credit that was approved by the IRS earlier this month. We plan to provide our full view of 2027 guidance on the fourth quarter call, but I want to highlight that we continue to expect incremental shipbuilding margin improvement in 2027. And expect cumulative free cash flow for 2026 and '27 to total between $1.2 billion and $1.3 billion.

To close, it was another good quarter as we continue to make steady progress and execute against our 2026 operational initiatives. We are pleased to improve the shipbuilding top line in Mission Technologies margin expectations for the year and remain focused on executing our plan.

With that, I'll turn the call back over to Christie to manage the Q&A.

Christie Thomas

Thanks, Tom. As a reminder to everyone on the call, please limit yourself to 1 initial question and 1 follow-up so we can get as many people through the queue as possible. Operator, I will turn it over to you to manage the Q&A.

Operator

[Operator Instructions] Your first question comes from the line of Scott Mikus with Melius Research.

質疑応答

Scott Mikus

I wanted to ask, so we saw the announcement from Anderol about Arsenal 2. They plan to hire 3,100 people in Maryland -- the Trump administration has also talked about opening another public shipyard. It looks like HD Hyundai, once they open a shipyard in the United States as well. I understand that investment in the workforce and the industrial base is great. But is there the risk that industry might end up with a bunch of shipyards that are all understaffed -- is everyone tapping the same labor pools?

Christopher Kastner

I think that's pretty good. good question, Scott. But what you need to understand about shipbuilding is it's pretty local. You draw from -- right around your shipyard for the most part or within a reasonable commute distance. The shipyards that are -- that have been announced are not really near our shipyards and they're in, I think, good geographic locations where they can draw on a different labor pool. You saw what we did with Charleston, we opened that yard -- that manufacturing yard to draw in a different labor pool. So if they were all opening the shipyards near each other, I think there'd be an issue. But since they're very local and have their own labor put, I don't think it's going to be a problem.

Scott Mikus

Okay. Got it. And then it seems like the outsourcing effort and throughput is really improving, particularly at Newport News. Navy officials have talked about getting to the 2 plus 1 submarine cadence around the 2032 time frame. With the progress you're making and what you're seeing from the supply chain, are you starting to see a credible path to pulling that 2 plus 1 cadence to the left?

Christopher Kastner

We're going to do all we can to accelerate submarine production. As I said in my prepared remarks, $800 million is on schedule, should happen this year. Second, Columbia class boat is ahead of cost and schedule projections or back -- or excuse me, improving on cost and schedule projections from the first boat. So that's very positive. I don't want to comment on pace of recovery because there's so much work to do in front of us, but there are some positive indicators at Newport News.

Operator

The next question comes from the line of John Godyn with Citigroup.

John Godyn

Obviously, great revenue performance, revenue growth year-to-date. And in addition to that, the unprecedented awards quarter, it's a little bit -- it's becoming hard to justify, at least from my perspective, the medium-term revenue growth that you guys have out there of 6%. I know that's a multiyear CAGR, but maybe you could just kind of reflect on that for a second.

Christopher Kastner

Sure. Let me start and kick it over to Tom. But -- and we'll provide an update to that or discuss that on the year-end call as well. we'll refresh that revenue guide. But remember, as you said, it is a multiyear guide. We have to execute. We have to execute on both our throughput increases as well as our distributed shipbuilding increases. So we think it's a fair CAGR to provide. We're comfortable with it. Obviously, we've done better over the last couple of quarters, but we think we should keep it right where it is for now.

So Tom, if you'd like to add anything.

Thomas Stiehle

Yes. So we have had strong growth. I think we have 5 quarters in a row now that has been double-digit growth, both for shipbuilding and HII. A piece of that has been the more capacity throughput and outsourcing. There's an element of that, that had to do with the wages that we've increased at the beginning of this year and Q2 of last year. We've lapped that now at Newport News through Q2, [indiscernible] increase in Q1 as we get into next year. there is meaningful growth in that on the labor and the materials that we have as well as the Charleston operations is accretive to that growth equation. I'm with you that when you think about the backlog has grown tremendous push here from $53 billion, $86 billion. So we know what we're building, when we're building it and where we're building it I think we're probably on the conservative side. We want to make sure that we continue to execute the increased throughput in capacity and outsourcing plans, and we'll evaluate that as we go forward.

John Godyn

Okay. Great. Appreciate it. And I'll ask the sort of margin question generally because I'm not trying to get ahead of next year's guidance specifically, but we've obviously been on a journey here to get shipbuilding margins back to kind of historical levels. Maybe we could just kind of revisit that topic? And what is the way to think about margins over the next few years, if we thought about an appropriate kind of annual rate of improvement?

Christopher Kastner

Yes. So I'm not going to give a specific rate on a pro it, and thanks for not getting ahead of 2027 guidance discussion, and I'll let Tom chime in as well. But I do expect both margin and cash to incrementally improve annually. And I still expect this business should be 9% to 10% return on sales and shipbuilding. So that hasn't changed.

And Tom, if you'd like to provide any other color, that would be great.

Thomas Stiehle

Well, obviously, we just talked about the revenue increase. So there will be more margin in cash that's generated from this portfolio as we continue to expand the margin rate or the cost efficiency here. We've seen a nice incremental step up that we've kind of talked about as a portfolio of transitions from pre-COVID to post-COVID as the sales continues to ramp. We've seen the shipbuilding go up from 5.2% return on sales in 2024 to 5.9% last year. And now we've taken the guide of 5.5% to 6.5% at the beginning of it. We narrowed the band to probably the midpoint is the right way to kind of look at it. If we think about the year as it closes out to [indiscernible]. So we're marching along both growing the top line and incrementally improving the bottom line as we've stabilized the supply chain, and we're really honing the production programs we have to get back to the cadence of expectation to eventually get to 95%.

Operator

Your next question comes from the line of Noah Poponak with Goldman Sachs.

Noah Poponak

Okay. Good morning, everyone. Tom, I think you mentioned in the quarter at Newport News when you're giving the EACs. I think you mentioned a favorable Columbia but didn't specify Virginia. I guess, just did the quarter reflect all of the EAC related to the submarine contracts you booked in the quarter? Or is there more of that still to do? And then you also mentioned the larger than historical norm movement in Newport News the last 2 quarters. I guess, is there a way to frame what the current, like real underlying Newport News margin is or where you think it lands in 4Q? Or how it progresses sequentially from here?

Thomas Stiehle

I appreciate the question, and there was a lot of moving parts. We tried to provide some color in the script remarks. And then when you take a look at the [indiscernible], you'll see that we called out what's changed on that front, too. Between Q2 and Q3 relative to Newport News, we had the incentives of the 14 boat award that we're were recognized in booked in Q2 and then the additional incentives and the awards themselves on the revenue side was booked in Q3. In those kind of settlements on those contracts, there was additional statement of work obviously put on contracts that we have had already in advanced procurement state. And then between the statement of work, some movement around on where that statement work sits in the claims, additional funding, capital incentives, performance incentives and just changes in the current booking rates that we have. had a lot of moving parts in there right now.

So it's true that it's difficult to see. I would stay away from just taking the cume correct and subtracting that from the gross outcomes and try and calculate a booking rate, a run rate we calculate too low right now as we move around contract value and incentives and book margin in that. That will settle down in Q4 with the mod and the home or behind us. Madison, the budgets are out and then the EAC changes have settled down now. So I think that's the way you want to take a look at it. We've had Ingalls in the low 7s and Newport News around 6%. And I think that's the fair way to take a look at it as we embark on the new contract awards. Q3 had the initial booking of VCS Block VI and Columbia Bill 2 adjustments in there as well. And I've talked about the capital incentives, which were accretive to the portfolio. So hopefully, that gives you some color. And when we get to Q4, we'll give you a projection of where we think ship billings are going to be for next year.

Noah Poponak

Do the mark-to-markets settle down considerably in '27 versus '26 as well beyond just happening in 4Q?

Thomas Stiehle

Yes. Absolutely -- anything unforeseen, which COVID [indiscernible] or something like that. But the contract changes and the movement in scope and contract value will be behind us. and it will get back to more normal types of adjustments in EAC run rates.

Noah Poponak

Okay. And I think Chris alluded to Ingalls being behind Newport News on pace just relative to the timing of the labor input changes. Is it just that? Or is there anything else? And about how far behind is it?

Christopher Kastner

It's a combination of that, and they really started to make a pretty good recovery in Q3 and into Q4 from a leverage standpoint. But they're also delivering 3 ships, LPD 30 by the end of this year and then LHA-8 and DDG 129 at the beginning of next year. The good news is [indiscernible] went out Wednesday. It will come back this weekend. Hopefully, it will be a successful trial, and they're making progress on the other test programs on those other 2 ships. So it's really a combination of a slow start in labor at the beginning of the year and ramping that, which -- there are some positive indicators and then coming through the test program on 3 ships, which is kind of unprecedented. We tried to look back the last time we've been in that sort of environment. and we couldn't find it since we spun. So it's really a good job Ingalls to fight through that. And the first really important step was to get 30 to see, which they've done.

Operator

Your next question comes from the line of Doug Harned with Bernstein.

Christopher Kastner

We can have Doug recall back in.

Operator

Your next question then will come from Seth Seifman from JPMorgan.

Seth Seifman

I wanted to start off on asking about the cash flow. I think the CapEx expectation for this year came down a bit, and whether we think about that as just maybe a reduced requirement or something that was deferred and then kind of bridging to the -- from $550 million this year to $700 million next year. any particular pieces you would call out or even just the breakdown between CapEx and cash from ops?

Thomas Stiehle

Thanks, Seth. I appreciate the question. Yes. So the CapEx here, we see where we stand right now, kind of year-to-date on that front. And we've guided in the power point release $500 million CapEx to give you $500 million to $600 million at the beginning of the year. with the higher revenue that's going to fall around 3.6% CapEx to sales. So it helps out a little bit in the March, but the proponents of just -- the good cash that we had in Q3 with the collections of $429 million as we march towards the guide of between $500 million and $600 million is more net income, better -- on the collection side, good cash collections in Q3 into Q4, a little bit of unwind on the working capital. It's down about 1.5 points from mid-10s to 9% right now, and that will continue to unwind as we get into Q4. into the mid-5% to 6% range, just as we play out the assets and contract assets and liabilities and advances and inventory that we have right now.

So relative to the guide that we gave you, like we did last year, we gave you a 2-year guide just depending on how things transition out with receipts and bills. It's 1.2 to 1.3. I still look at this year as the midpoint here and then kind of next year ramping up as we get into 2027.

Seth Seifman

Okay. Okay. Cool. And then, Chris, when we think about the frigate. I know -- I think it was about a year ago when the Navy first talked about this plan to use the national security cutter as a baseline. We've had some leadership changes in the Navy since then. At that time, it seemed like there was a very aggressive plan to put a boat in the water in 2028, that -- doing that would suggest a need for maybe some more accelerated activity soon. How are you thinking about that? And what's the state of play on that now?

Christopher Kastner

It's actually really positive. Thanks for that question. We're on schedule. Manufacturers on schedule. A number of units already in production. I was down there last month and toured them, they look great. We passed the CDR and PRR. So we're continuing to meet our commitments relative to getting that boat in the water by the end of 2028. Now we do need to get under contract in Q1, and that's a 27 boat. So we need to make sure that happens. But really proud of the work that the Ingalls team is doing on the frigate.

Operator

Your next question comes from the line of David Strauss with Wells Fargo. .

Benjamin Tomick

This is Ben Tomick on for David. I was just curious what is the pre-COVID versus post-COVID revenue mix end up in '26? And then how does that compare to where you guys expect it to end up by the end of 2027?

Thomas Stiehle

So it's Tom here. And we're right on the market. We've talked about 2027 being a transition year. So by the end of '27, we should have more post COVID work, like marginally more. post-COVID than pre-COVID work. And then we'll continue to watch that as we get to the end of the decade, 8 to 10 percentage points as we watch out and retire the older ships here. So we're on plan, and there's no new news over the guide that we've given you the trend.

Benjamin Tomick

Got it. And then on the CVN 79 Kennedy with that getting the preliminary acceptance. What's left to finish there before the final delivery? And then are there any other key milestones we should be watching out for over the next couple of quarters?

Christopher Kastner

We're progressing well with the final systems that need to be completed. I wouldn't -- I don't think there's anything significant you need to watch for. We just need to get that shift to deliver. It's doing it's performing great. We've got people on the ship right now finishing up. So I wouldn't say it's smooth sailing going forward. There's a lot of hard work to do, but we're definitely on track.

Operator

Your next question comes from the line of Gautam Khanna with TD Cowen.

Gautam Khanna

I was wondering because the throughput is up 9% year-to-date, and I think the target previously was 15. Is there an update to the target? And a, and then b, if not, like what is sort of the economic consequence because of the running under that number?

Christopher Kastner

No real update to the target. We are trending a bit south of that towards the end of the year. But I don't want to get ahead of that and we'll just -- we'll see how we close in both shipyards. Newport News is doing very well, as I said in my comments, singles just had a tough start related to labor and getting through those 3 ships. So we'll just see how that evolves and closes for the year.

Tom, if you'd like to comment on the economics of it or what it means from a sales standpoint.

Thomas Stiehle

Yes. So obviously, it does roll into that Gautam on that front. Like meaningfully, as we work ourselves through a ship construction itself, more earned hours or more efficiency there. assisting the EACs and eventually the profitability and cash against that. But being 9% year-to-date across the first 3 quarters, all that's cranked into the EACs right now, both the actuals to date and the forecasting going forward as well as the forecast that we gave you here for the back half of this year, free cash flow of next year. So it's up to date, we're kind of aligned, the financials are in line with the expectations and what we're doing right now.

Gautam Khanna

Okay. This to be clear. And so if it were to stay at 9% for the year, a quarter from now, that in and of itself does not drive a negative variance to the [indiscernible] catch-ups?

Thomas Stiehle

No, that's correct. That's correct.

Gautam Khanna

Okay. Cool. And then just 1 last one. Tom, if you could just talk about free cash flow, the bridge into Q4? And then just a preliminary view on '27 with respect to -- I mean, if there's any lumpiness or what have you, that you can call out that's visible to you at this point? If you could just talk about what's driving that Q4 cash? And then how we should think about the lumpiness in 2027?

Thomas Stiehle

Yes. So we have a very tight view of that. We look at that weekly. I tend to [indiscernible] meeting have 55 line items to bring home the ETC and what we want to get on free cash flow on the back end. We understand what's in front of us. I feel good about it. Each one of those actions and tests that we have are on costs. That's why we reiterated the guide here. it's selling off the ships that we talked about 800 and LPD 30. There's a lot of contract actions and issues in milestones performance incentive capital incentives holding EACs in schedule with incremental increases in booking rates, allowing us to booking little bit higher. So all in play. And as we said, we reiterated the guide here. We've been consistently along. As we go into next year, I think it's more of the same. We do have a beneficial we talked about an IRS kind of settlement we have on tax R&D. It was both in play when we talked to you in Q2. Last month, it was approved both by the IRS and had run up to Congress from authorization too. So that's in play to help the lift next year as well.

But I think just the stabilization of the production programs we have, staying on schedule, CPIs and SBI getting about the throughput that we've talked about on that last question for the year is the playbook and how we're going to see $1.2 billion to $1.3 billion. Also that's a position with 2027 in front of us. So I think it's risk bound and adjusted. It's factored in for both opportunities and risk. So again, it's another position I feel good about that it's in play, and we're happy to give you that guide for next year.

Operator

Your next question comes from the line of Ron Epstein with Bank of America.

Ronald Epstein

Maybe changing gears here just a little bit. Can we talk about unmanned systems and you won a bunch of awards there. How do you think about broadly, the teaming and unmanned systems, but the bigger ships that you guys make like if we have -- where do you see your business being 5 or 10 years from now, a balance between the traditional blue water stuff that you make and now the nontraditional unmanned autonomous stuff that you're building?

Christopher Kastner

Yes. Really interesting question, Ron. And I'm going to -- let me start, and then I'll kick it over to Andy, and I'll finish up with how we see the business going forward between the mix. So first things first, Unmanned Systems, north of $200 million top line this year, margin better than the average in Mission technologies and really got some really nice awards.

So I'm going to kick it over to Andy to kind of give you a summary of Autonomous Systems.

Andy Green

Ron, and thanks for the question. Yes, we're very excited about the MUSV program and unmanned in general. As you know, Ron, we've been in this business for just about 2 decades, making selling and installing and developing the Odyssey Autonomy suite evolving that over the past several decades. We've got a number of vehicles, like I said in my opening comments, we have got a number of vehicles out there, both UUVs and U.S. fees, and most of them are still in service today. We view it as -- it's a very natural extension of what we do here at HII. Unmanned Systems is something that, as you know, you've been following the company for a long time. We looked at this and invested in unmanned systems very early on as a company because we saw this coming and we knew that the customer was going to be needing this and the demand signal was going to be there, and we got out in front of it. .

When you think about how that market develops, right now, you're looking at strictly the, let's say, the MUSV program. that's going to be -- this is all recently announced. We've got 10 vessels that we're going to deliver over the next couple of years. That's in partnership with our friends at Brew Brothers and Halamar down on the Gulf Coast, helping out with Holland mechanical and the construction as well as on the autonomy stack side, applied intuition and green room robotics who are helping to augment the Odyssey Autonomy suite.

And you saw the results of that -- the success of that in the successful demo test that we did for the Navy a few weeks ago, demonstrating the robustness and effectiveness of that autonomy stack. So we've got the solutions out there. We're continuing to look at additional opportunities that -- I won't comment specifically on right now because there are competitions in progress. but there's other opportunities out there for different sizes of U.S. fees, different capabilities. We continue to look at those and to invest in those along with MUSV.

And over time, you're going to see that, that demand signal from the Navy, which is very strong for autonomous, both autonomous ships as well as UUVs is very, very strong. It's only going to get stronger and you're going to see that mix of the overall fleet start to evolve, and you're going to see a much greater number of unmanned service vehicles and UUVs over time. And at the end of the day, the unmanned vessels are going to augment the legacy capital shifts and submarines that you see out there, they're going to extend the reach of those platforms. They're going to work in close coordination with those platforms on an autonomous basis, and they're going to keep our sailors out of harm's way by doing things that we don't want to send them into. So that's kind of the way we see it, Ron. Happy to take any more questions.

Christopher Kastner

Yes, Ron, before we go on -- and thanks, Andy. Thanks, Andy. The other part of that equation, and if you step back on where will HII go and how will the -- how big will we be and how it's distributed between manned and unmanned. We're always going to be a large capital ship provider that's going to continue. We see significant demand for that. And you see that in our 6% growth rate. But as Andy said, we're going to deliver a lot more unmanned vessels. Interesting part of that is that we actually are the primary developer from [indiscernible], which is really the distribute, the network that connects all the nodes so that you get a good operating environment, you could see the operating environment.

So when you go think about HII, you have manned, unmanned and Minato connected really provides the tools the Navy needs to execute on their mission. So I think -- we think that's how that's evolving. Unmanned is going to be a greater part of our portfolio. I don't think it's ever going to eclipse large capital ships. But the hedge force is happening. It's gradually becoming part of part of the Navy and this MUSV award is very important to get those ships delivered and start getting in the water and testing them out.

Ronald Epstein

Got it. Got it. And then maybe just 1 follow maybe update like this is sort of like I'll be that guy, right, for a minute? Isn't it really hard to set up a ship drug. I mean if you're new to it, I mean, Chris, you've been numerous for a year. So I guess someone said, "Hey, Chris, shipyards -- how do you think about that? I mean just curious if you're comfortable saying like this is sort of like really so go from strads?

Christopher Kastner

Yes. So it is hard to set up a shipyard, okay? What the design tools are, what your ERP systems are, what your IT systems are, it is challenging to set up a shipyard. probably more challenging than that is having the labor team to execute on the ships and that legacy knowledge to execute on shipbuilding programs. You can eventually get a shipyard set up it's the talent to execute on the programs and all that experienced -- we're testing 3 ships at Ingalls at the same time. that's amazing. So I get it, it's hard to set up a shipyard, but it can be done. There's enough folks out there that understands how to set up a shipyard. But I think more importantly is really the talent to execute on the programs after it's set up.

Because you kind of set up that shipyard not only with technology in mind but with how you're going to execute on the programs in mind. So yes, it is challenging, but it needs to be done for the nation, right? We need to accelerate shipbuilding capacity. So anything that we do to accelerate shipholding capacity, I think is positive.

Operator

Your next question comes from the line of Myles Walton with Wolfe Research.

Unknown Analyst

This is actually Emily on for Myles. I had a quick question on Ingalls. A quick question on Ingalls on the Surface Combatant commentary. Is the weaker performance isolated to specific holes or is it sort of across the board on the program asking as we look ahead to deliveries for next year?

Thomas Stiehle

Emily, it's Tom here. Yes, I'll comment on that. We referenced in the remarks there that it was against the destroyers. We have a lot in flow. It's a production program. So just getting the engineering people in parts in a rhythm down there. It's just a little drag on it. So we incorporated that into the EACs. Then on the macro sense [indiscernible] with the 3 ships in integration and test, it's just keeping them busy down there, keeping those on schedule as well. So nothing too alarming down there. I think we went [indiscernible] from a return on sales perspective. We're pushing more volume through Ingalls last year and this year. So I'm proud of what the team is accomplishing down there. They're working more sales, and then they have the portfolio right now working itself through pre-covid contracts and integration and test. So a fairly steady quarter from an efficiency standpoint down at Ingalls.

Unknown Analyst

Sounds good. And then a quick follow-up sort of on the larger budget landscape. The Trump class battleship is still sort of hanging in the ether, but we're, at the same time, looking at a possible change in party control and Congress. So how are you all thinking about the survivability of that program?

Christopher Kastner

We're in the initial stages of planning for that design efforts with the Navy on that program. It's in the budget. Ultimately, we're going to build what they ask us to build. So we'll continue to support the customer in that regard.

Operator

I am not showing any further questions at this time. I would now like to hand the call back over to Mr. Kastner for any closing remarks.

Christopher Kastner

Thank you, everyone, for joining the call. With approximately 90% of expected shipping revenue through 2030 already under contract, our focus is squarely on execution, growing our workforce, improving throughput and delivering the shifts in technologies our nation needs. We look forward to keeping you updated on our progress. Thank you.

Operator

That does conclude today's conference call. You may now disconnect.