Huntington Ingalls Industries vs. Lockheed Martin: Which Industrial Stock Is a Better Buy in 2026?

Defense spending remains a critical pillar of government budgets as global tensions evolve. Deciding whether to invest in Huntington Ingalls Industries (NYSE:HII) or Lockheed Martin (NYSE:LMT) depends on your preferred defense niche.

Huntington Ingalls dominates military shipbuilding, while Lockheed Martin is a diversified aerospace giant. Both rely heavily on government contracts, making them defensive staples for many portfolios. This comparison explores which industrial heavyweight offers the better balance of growth and stability for your investment dollars.

The case for Huntington Ingalls Industries

Huntington Ingalls Industries designs and builds many of the most complex ships in the world for the U.S. military. As the primary builder of aircraft carriers and submarines, the company is a cornerstone of the defense stock landscape. Approximately 81% of total revenue was generated from the U.S. Navy in 2025. Customer concentration like this adds a layer of risk to the business.

In fiscal 2025, revenue reached nearly $12.5 billion, up 8.2% year over year. The company reported net income of roughly $605 million. This resulted in a net margin, which is the percentage of revenue kept as profit after all expenses, of about 4.8%.

As of Huntington’s December 2025 balance sheet, the debt-to-equity ratio was close to 0.6. This metric, which compares total debt to the value owned by shareholders, indicates a relatively low level of debt. The company also generated free cash flow of about $794 million, which is the cash remaining after covering operations and capital investments.

The case for Lockheed Martin

Lockheed Martin is a global leader in aerospace and defense technology, operating across aeronautics, missiles, and space systems. The company derived 72% of its 2025 sales from the U.S. government, including a significant 27% from the F-35 program. So, much like Huntington Ingalls, it faces a fair amount of customer concentration risk, as program cancellations can impact the bottom line.

During fiscal 2025, revenue was nearly $75.1 billion, reflecting growth about 5.7%. The company reported net income of approximately $5 billion. This translated into a net margin of roughly 6.7%.

Based on the December 2025 balance sheet, Lockheed’s debt-to-equity ratio is approximately 3.2. This indicates that total debt is more than three times the value of shareholder equity. The company reported free cash flow of nearly $6.9 billion.

Risk profile comparison

Huntington Ingalls faces significant risks due to its reliance on U.S. Navy funding and potential shifts in government spending priorities. The company also deals with intense competition from other shipbuilders like General Dynamics (NYSE:GD), which can lead to bid protests and contract delays. Furthermore, cost overruns on fixed-price contracts can reduce profitability if the company cannot recover those expenses from the government.

Lockheed is heavily exposed to changes in defense budgets, particularly regarding the high-stakes F-35 program. Supply chain disruptions for rare-earth minerals or microelectronics can delay deliveries and increase costs. It also competes with major companies like Northrop Grumman (NYSE:NOC) and faces evolving cybersecurity threats from nation-state actors targeting sensitive military data.

Valuation comparison

Huntington Ingalls appears cheaper because it carries a lower forward P/E based on future earnings estimates and a lower P/S ratio.

Sector benchmark uses the SPDR XLI sector ETF.
Valuation metrics sourced from Financial Modeling Prep (FMP) and may differ from other data providers.

Which stock would I buy in 2026?

These two defense giants have pretty significant concentration risk given they get around 70%-80% of their revenue from the U.S. government. That said, the cynic (realist?) in me thinks that's probably not a major issue. I cannot picture a universe where defense spending by the U.S. government decreases over time. In fact, since 1960, the budget has increased nearly every year, and in 2026, it is poised to cross the $1 trillion mark. So I think we can set that concern aside.

Between the two, I think Huntington Ingalls looks more attractive. It has a slightly lower valuation than Lockheed, which is nice, but what makes it especially appealing is its level of debt. Huntington's debt-to-equity ratio is just 0.6, while Lockheed's is 3.2. Huntington is slightly less profitable, but it's posting faster revenue growth, so it gets my vote.

Erin Kennedy has no position in any of the stocks mentioned. The Motley Fool recommends Lockheed Martin. The Motley Fool has a disclosure policy.