Back to top

Image: Bigstock

Northrop Grumman (NOC) Beats on Q2 Earnings, Ups '20 View

Read MoreHide Full Article

Northrop Grumman Corporation (NOC - Free Report) reported second-quarter 2020 earnings of $6.01 per share, which surpassed the Zacks Consensus Estimate of $5.36 by 12.1%. The bottom line also increased 19% from $5.06 reported in the year-ago quarter.

Total Sales

In second-quarter 2020, Northrop Grumman reported total sales of $8,884 million, which surpassed the Zacks Consensus Estimate of $8,589 million by 3.4%. Sales also increased 5% from the year-ago quarter’s $8.456 million. The upside was primarily driven by a solid double-digit increase in the Space Systems’ sales.

Backlog Count

Northrop Grumman’s total backlog stood at $70 billion at the end of second-quarter 2020 compared with $64.84 billion at 2019-end. Of the total backlog, $33.86 billion was funded.

Segmental Details

Effective Jan 1, 2020, Northrop made some structural changes in its reportable segments.

Aeronautics Systems: Segment sales of $2,925 million grew 7% year over year as a result of higher sales from both autonomous systems and manned aircraft.

Operating income improved 4% to $310 million, whereas operating margin contracted 40 basis points (bps) to 10.6%.

Mission Systems: Segment sales increased 2% to $2,446 million, driven by higher sales volume from airborne sensors and network programs.

Operating income rose 3% to $347 million, with operating margin expanding 10 bps to 14.2%.

Defense Systems: Sales at this segment declined 2% to $1,886 million due to lower volumes in battle management & missile system programs.

Operating income increased 2% to $217 million, while operating margin expanded 40 bps to 11.5%.

Space Systems: Space Systems’ second-quarter 2020 sales increased 15% to $2,048 million owing to higher sales from both Space and Launch & Strategic Missiles programs.

The segment’s operating income improved 8% to $209 million, while operating margin contracted 60 bps to 10.2%.

Operational Update

Total operating costs and expenses at the end of the quarter were $7,890 million, up 5.1% from the year-ago quarter’s $7,510 million.

Operating income during the quarter increased 5% year over year to $994 million.

Northrop Grumman Corporation Price, Consensus and EPS Surprise

Northrop Grumman’s cash and cash equivalents as of Jun 30, 2020, were $4,178 million, up from $2,245 million as of Dec 31, 2019.

Long-term debt (net of current portion) as of Jun 30, 2020, was $14,259 million, up from $12,770 million as of Dec 31, 2019.

Net cash inflow from operating activities as of Jun 30, 2020, was $1,344 million compared with $694 million as of Jun 30, 2019.

2020 Guidance

Northrop Grumman has raised its 2020 financial guidance and expects to generate revenues of $35.3-$35.6 billion. The Zacks Consensus Estimate for the company’s full-year sales, pegged at $35.19 billion, lies below its projected view.

It expects free cash flow of $3.15-$3.55 billion for 2020.

Northrop Grumman has also raised its full-year earnings expectations from $21.80-$22.20 to $22.00-$22.40 per share. The Zacks Consensus Estimate for the company’s 2020 earnings, pegged at $22.12, lies below the midpoint of the company’s guidance.

Zacks Rank

Northrop Grumman currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recent Defense Releases

Teledyne Technologies (TDY - Free Report) reported second-quarter 2020 adjusted earnings of $2.43 per share, which surpassed the Zacks Consensus Estimate of $2.01 by 20.9%.

Hexcel Corporation (HXL - Free Report) reported second-quarter 2020 adjusted earnings of 8 cents per share, which missed the Zacks Consensus Estimate of 20 cents by 60%.

Lockheed Martin (LMT - Free Report) reported second-quarter 2020 adjusted earnings of $6.13 per share, which surpassed the Zacks Consensus Estimate of $5.71 by 7.4%.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>