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Northrop Grumman (NOC) Beats Q2 Earnings, Ups '16 View

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Northrop Grumman Corporation (NOC - Free Report) reported second-quarter 2016 adjusted earnings of $2.60 per share, beating the Zacks Consensus Estimate of $2.50 by 4%. Reported earnings were also up 5.3% from $2.47 recorded in the year-ago quarter.

Excluding after-tax pension adjustments, earnings came in at $2.85 per share, up 4% year over year.

Total Revenue

In the second quarter of 2016, Northrop Grumman reported total revenue of $6,000 million, missing the Zacks Consensus Estimate of $6,071 million by 1.7%. Revenues, however, increased from the year-ago figure of $5,896 million by 1.8%.

NORTHROP GRUMMN Price, Consensus and EPS Surprise

NORTHROP GRUMMN Price, Consensus and EPS Surprise | NORTHROP GRUMMN Quote

Quarterly Segmental Details

Aerospace Systems: Segment sales of $2.6 billion increased 4.1% year over year on the back of higher volumes for the manned aircraft and autonomous systems programs.

Operating income, however, dropped 2.2% to $312 million, while operating margin contracted 80 basis points (bps) to 12% due to a less favorable performance of the manned aircraft.

Mission Systems: Segment sales were up 2.4% to $2.69 billion due to lower volumes for the Advanced Capabilities programs, as well as the Sensors and Processing programs.

Operating income also inched up 0.9% to $351 million, while operating margin shrank 20 bps to 13%.

Technology Services: Sales at the segment were $1.21 billion, down 2%. The decrease was primarily due to lower volumes of the Advanced Defense Services (ADS) programs.

Operating income rose 2.3% to $131 million, while operating margin expanded 50 bps to 10.8%.

Operational Update

Total operating cost and expenses in the second quarter were $5.2 billion, up 2.4%.

Operating income during the quarter fell 2% to $0.8 billion.

Financial Condition

Northrop Grumman’s cash and cash equivalents as of Jun 30, 2016 were $1.14 billion, compared with $2.32 billion as of Dec 31, 2015.

Long-term debt (net of current portion) as of Jun 30, 2016 was $6.39 billion, almost in line with the figure as of Dec 31, 2015.

Net cash from operating activities in first half of 2016 was $544 million, compared with an outflow of $28 million in the year-ago period.

2016 Guidance

Northrop Grumman reiterated its revenue expectations in the band of $23.5 billion to $24.0 billion.

The company raised its guidance for diluted earnings per share to the range of $10.75–$11.00 from the prior projection of $10.40–$10.70.

Further, the company reiterated its free cash flow guidance of $1.5–$1.8 billion.

Other Aerospace & Defense Releases

Rockwell Collins Inc. reported results for third-quarter fiscal 2016 ended Jun 30. The company’s adjusted earnings per share of $1.63 surpassed the Zacks Consensus Estimate of $1.59 by 2.5%. Reported earnings also improved 22.6% from $1.33 a year ago.

Textron Inc. (TXT - Free Report) reported second-quarter 2016 earnings from continuing operations of 66 cents per share, beating the Zacks Consensus Estimate of 63 cents by 4.8%. Earnings were also up 10% from 60 cents reported in the year-ago quarter.

Lockheed Martin Corp. (LMT - Free Report) reported second-quarter 2016 earnings of $3.32 per share, surpassing the Zacks Consensus Estimate of $2.92 by 13.7%. Earnings also increased 12.9% from the year-ago level.

Zacks Rank

Northrop currently has a Zacks Rank #2 (Buy).

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