HII [HII] on Thursday reported strong earnings in its second quarter driven by broad strength across its operating segments and sales were higher primarily due to an acquisition a year ago and work on aircraft carriers.

Net income soared 38 percent to $178 million, $4.44 earnings per share (EPS), from $129 million ($3.20 EPS) a year ago, whooping consensus estimates by $1.10 per share.

At the operating level, income was higher due to higher risk retirements and favorable changes in contract estimates at the company’s shipbuilding segments and higher equity income from a ship repair and specialty fabrication joint venture where HII is a minority owner. At the Ingalls Shipbuilding segment, HII cited a benefit from higher risk retirement on the USS Harrisburg LPD-30 amphibious transport dock ship, which will be launched in 2024.

The bottom-line also benefited from more favorable state income taxes and pension adjustments versus a year ago.

Sales in the quarter increased 19 percent to $2.7 billion from $2.2 billion, driven primarily by the acquisition of Alion Science & Technology in the third quarter of 2021 and aircraft carrier revenues at the Newport News Shipbuilding segment.

Orders in the quarter tallied $2 billion and backlog stood at $47.2 billion, down 3 percent from $48.5 billion at the end of 2021. The recent win by the Mission Technologies segment of the potential $826 million Decisive Mission Actions and Technology Services task order to support the Defense Department will help orders and backlog in the third quarter, Chris Kastner, HII’s president and CEO, said during the company’s earnings call.

Awards and the pace of contracting have slowed at Mission Technologies, leading the company to revise the sales outlook at the segment from about $2.6 billion to between $2.4 billion and $2.6 billion. HII maintained its overall sales guidance at between $8.2 billion and $8.5 billion.

Kastner said the overall outlook at Mission Technologies is bright. The segment has a pipeline of $61 billion in potential opportunities. It also recently won the Mobility Air Forces Distributed Mission Operations contract, which builds on the company’s live, virtual and constructive training for the Navy to now provide these capabilities to the Air Force and other services, he said.

Guidance for segment operating margins and free cash flow for the year was also unchanged. Free cash flow in the quarter was a robust $208 million.

Labor availability in the company’s shipyards “remains a key risk and focus area,” Kastner said. So far this year, HII has hired more than 2,000 shipbuilders against the target of 5,000, putting the company behind plan. To make up the gap, the company is using leased labor and giving workers overtime, he said.

HII continues to “execute on our commitments,” Kastner said.