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Northrop Grumman (NOC) Beats on Q3 Earnings, Ups '20 View

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Northrop Grumman Corporation (NOC - Free Report) reported third-quarter 2020 earnings of $5.89 per share, which surpassed the Zacks Consensus Estimate of $5.60 by 5.2%. Moreover, the bottom line improved 7% from $5.49 reported in the year-ago quarter.

Total Sales

In third-quarter 2020, Northrop Grumman reported total sales of $9,083 million, which surpassed the Zacks Consensus Estimate of $8,838 million by 2.77%. Moreover, sales grew 7% from the year-ago quarter’s $8,475 million. The upside was driven by growth in majority of its business segments.

Backlog

Northrop Grumman’s total backlog at the end of third-quarter 2020 was $81.3 billion. Funded backlog during the quarter amounted to $33.3 billion, whereas unfunded backlog amounted to $48 billion.

Segmental Details

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

Aeronautics Systems: Segment sales of $2,914 million grew 7% year over year as a result of higher sales from both autonomous systems and manned aircraft.

Operating income improved 9% to $294 million, whereas operating margin expanded 40 basis points (bps) to 10.1%.

Mission Systems: Segment sales increased 10% to $2,551 million, driven by higher sales volumes from airborne sensors and network sales; increased navigation, targeting & survivability sales and elevated maritime/land systems & sensors sales.

Operating income rose 5% to $370 million, while operating margin contracted 70 bps to 14.5%.

Defense Systems: Sales in this segment declined 4% to $1,859 million due to lower volumes in mission readiness and battle management & missile system programs.

Operating income increased 8% to $217 million, while operating margin expanded 130 bps to 11.7%.

Space Systems: Space Systems’ third-quarter 2020 sales increased 17% to $2,198 million owing to higher sales from both Space and Launch & Strategic Missiles programs.

The segment’s operating income improved 17% to $224 million, with operating margin expanding 10 bps to 10.2%.

Operational Update

Total operating costs and expenses at the end of the quarter were $8,098 million, up 7.6% from the year-ago quarter’s $7,524 million.

Operating income during the quarter improved 3.6% year over year to $985 million.

Northrop Grumman Corporation Price, Consensus and EPS Surprise

Financial Condition

Northrop Grumman’s cash and cash equivalents as of Sep 30, 2020, were $4,995 million, up from $2,245 million as of Dec 31, 2019.

Long-term debt (net of current portion) as of Sep 30, 2020, was $14,260 million, up from $12,770 million as of Dec 31, 2019.

Net cash inflow from operating activities as of Sep 30, 2020, was $2,703 million compared with $1,833 million as of Sep 30, 2019.

2020 Guidance

Northrop Grumman raised its 2020 financial guidance and expects to generate revenues of $35.7-$36 billion. The Zacks Consensus Estimate for the company’s full-year sales, pegged at $35.5 billion, lies below its projected view.

It expects free cash flow of $3.3-$3.6 billion for 2020.

Northrop Grumman has also raised its full-year earnings expectations from $22.00-$22.40 to $22.25-$22.65 per share. The Zacks Consensus Estimate for the company’s 2020 earnings, pegged at $22.46 per share, lies above the midpoint of the company’s guidance range.

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

Lockheed Martin (LMT - Free Report) reported third-quarter 2020 earnings from continuing operations of $6.25 per share, which surpassed the Zacks Consensus Estimate of $6.07 by 3%.

Hexcel Corporation (HXL - Free Report) reported third-quarter 2020 loss of 29 cents per share against the Zacks Consensus Estimate of earnings of 7 cents. The bottom line also declined from the prior-year quarter’s earnings per share of 90 cents.

Teledyne Technologies (TDY - Free Report) reported third-quarter 2020 adjusted earnings of $2.48 per share, which surpassed the Zacks Consensus Estimate of $2.40 by 3.3%.

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