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Northrop Grumman (NOC) Q3 Earnings Miss, Sales Rise Y/Y

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Northrop Grumman Corporation (NOC - Free Report) reported third-quarter 2022 earnings of $5.89 per share, which missed the Zacks Consensus Estimate of $6.09 by 3.3%. The bottom line declined by 11.2% from the $6.63 reported in the year-ago quarter.

Total Sales

In the third quarter of 2022, Northrop Grumman reported total sales of $9 billion, which missed the Zacks Consensus Estimate of $9.15 billion by 1.6%. However, sales increased by 3% from the year-ago quarter’s $8.7 billion.

The upside can be attributed to strong demand and improving trends in labor availability.

Organic sales dropped 1% year over year, primarily due to lower sales in the Aeronautics Systems, Defense Systems and Mission Systems segments.

 

 

Backlog Count

Northrop Grumman’s total backlog stood at $79.65 billion at the end of the third quarter of 2022 compared with $79.98 billion at the second-quarter 2022 end.

Segmental Details

Aeronautics Systems: Segment sales of $2,537 million declined 7% year over year due to lower volumes in both Manned Aircraft and Autonomous Systems.

The operating income went down 1% to $262 million, whereas the operating margin expanded 60 basis points (bps) to 10.3%.

Mission Systems: Segment sales increased 1% to $2,456 million due to higher restricted sales in the Networked Information Solutions business area as well as higher Surface Electronic Warfare Improvement Program volumes.

The operating income decreased 1% to $368 million, and the operating margin contracted 30 bps to 15%.

Defense Systems: Sales in this segment declined 5% to $1,345 million, primarily due to the completion of a Joint Services support program, the lower scope of an international training program, and the winding down of the UKAWACS and JSTARS programs.

The operating income declined 10% to $158 million, while the operating margin contracted 70 bps to 11.7%.

Space Systems: Third-quarter 2022 sales rose 18% to $3,163 million, driven by higher sales in the Launch & Strategic Missiles business area due to a ramp-up in development programs.

The segment’s operating income improved 1% to $290 million. However, the operating margin contracted 150 bps to 9.2%.

Operational Update

The operating income during the quarter declined 19% to $844 million, primarily due to a reduction in the FAS/CAS operating adjustment.

Financial Condition

Northrop Grumman’s cash and cash equivalents at the end of the third quarter of 2022 were $1,666 million, down from $3,530 million as of Dec 31, 2021.

The long-term debt (net of the current portion) at the end of the third quarter of 2022 was $11,803 million, down from $12,777 million as of Dec 31, 2021.

The net cash outflow from operating activities as of Sep 30, 2022 was $1,335 million compared with the year-ago quarter figure of $1,163 million.

2022 Guidance

Northrop Grumman reaffirmed its financial guidance for 2022.

The company still expects to generate revenues in the range of approximately $36.2-36.6 billion for 2022. The Zacks Consensus Estimate of $36.35 billion is in line with the midpoint of the company’s guided range.

Adjusted earnings are still projected in the range of $24.50-$25.10 per share. The Zacks Consensus Estimate of $24.73 is lower than the midpoint of the guided range.

The company continues to expect adjusted free cash flow in the range of $1.50-$1.80 billion in 2022.

Zacks Rank

Northrop Grumman currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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