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Northrop Grumman (NOC) Beats on Q2 Earnings, Ups 2021 View

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Northrop Grumman Corporation (NOC - Free Report) reported second-quarter 2021 earnings of $6.42 per share, which surpassed the Zacks Consensus Estimate of $5.75 by 11.7%. The bottom line also increased 6.8% from $6.01 reported in the year-ago quarter.

Total Sales

In second-quarter 2021, Northrop Grumman reported total sales of $9,151 million, which surpassed the Zacks Consensus Estimate of $8,708 million by 5.1%. Sales also increased 3% from the year-ago quarter’s $8,884 million.

The upside was primarily driven by a solid double-digit surge in Space Systems’ sales.

Backlog Count

Northrop Grumman’s total backlog stood at $76.6 billion at the end of second-quarter 2021 compared with $81 billion at 2020-end. Of the total backlog, $33.1 billion was funded.

Segmental Details

Aeronautics Systems: Segment sales of $2,913 million remained almost flat year over year, as a result of higher restricted and E-2 production volumes offset by a reduction in A350 production activity and lower volumes on the B-2 Defensive Management Systems Modernization program.

Operating income declined 3% to $300 million, whereas operating margin contracted 30 basis points (bps) to 10.3%.

Mission Systems: Segment sales increased 6% to $2,588 million, driven by higher volumes across the sector.

Operating income rose 18% to $408 million, with operating margin expanding 160 bps to 15.8%.

Defense Systems: Sales at this segment declined 24% to $1,427 million due to a reduction in sales related to the IT services divestiture.

Operating income declined 18% to $177 million, while operating margin expanded 90 bps to 12.4%.

Space Systems: Space Systems’ second-quarter 2021 sales surged 34% to $2,748 million owing to higher sales from both Space and Launch & Strategic Missiles programs.

The segment’s operating income soared 44% to $301 million, while operating margin contracted 80 bps to 11%.

Operational Update

Total operating costs and expenses at the end of the quarter were $8,107 million, up 2.8% from the year-ago quarter’s $7,890 million.

Operating income during the quarter increased 5.3% year over year to $1,044 million.

Northrop Grumman Corporation Price, Consensus and EPS Surprise

Financial Condition

Northrop Grumman’s cash and cash equivalents as of Jun 30, 2021, were $3,941 million, down from $4,907 million as of Dec 31, 2020.

Long-term debt (net of current portion) as of Jun 30, 2021, was $12,764 million, down from $14,261 million as of Dec 31, 2020.

Net cash inflow from operating activities as of Jun 30, 2021, was $962 million compared with $1,344 million as of Jun 30, 2020.

2021 Guidance

Northrop Grumman has raised its 2021 revenue and earnings guidance.

The company currently expects to generate revenues of $35.8 -$36.2 billion compared with the prior guided range of $35.3-$35.7 billion during 2021. The Zacks Consensus Estimate of $35.7 billion lies below the company’s guided range.

The company’s 2021 earnings are currently projected to be $24.40-$24.80 per share compared with the previous guidance of $24-$24.50 per share. The Zacks Consensus Estimate of $24.51 per share is lower than the midpoint of the company’s guided range.

The company estimates a free cash flow of $2.20-$2.50 billion in 2021.

Zacks Rank

Northrop Grumman currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recent Defense Releases

Lockheed Martin Corp. (LMT - Free Report) reported second-quarter 2021 adjusted earnings of $7.13 per share, which surpassed the Zacks Consensus Estimate of $6.51 by 9.5%.

Teledyne Technologies Inc. (TDY - Free Report) reported second-quarter 2021 adjusted earnings of $4.61 per share, which surpassed the Zacks Consensus Estimate of $2.94 by 56.8%. The bottom line also improved 72% from the year-ago quarter’s $2.68.

General Dynamics Corp. (GD - Free Report) reported second-quarter 2021 earnings from continuing operations of $2.61 per share, which beat the Zacks Consensus Estimate of $2.52 by 3.6%.