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Northrop Grumman (NOC) Beats on Q1 Earnings, Ups '23 EPS View

Northrop Grumman Corporation NOC reported first-quarter 2023 earnings of $5.50 per share, which beat the Zacks Consensus Estimate of $5.16 by 6.6%. The bottom line, however, decreased 10% from $6.10 per share recorded in the year-ago quarter.

Total Sales

NOC’s total sales of $9.30 billion beat the Zacks Consensus Estimate of $9.20 billion by 1.1%. The top line also increased 6% from $8.80 billion in the year-ago quarter.

This sales improvement can be attributed to strong demand.

Northrop Grumman Corporation Price, Consensus and EPS Surprise

Northrop Grumman Corporation Price, Consensus and EPS Surprise
Northrop Grumman Corporation Price, Consensus and EPS Surprise

Northrop Grumman Corporation price-consensus-eps-surprise-chart | Northrop Grumman Corporation Quote

Backlog Count

The company’s total backlog stood at $77.50 billion at the end of first-quarter 2023 compared with $78.70 billion at the end of fourth-quarter 2022.

Segmental Details

Aeronautics Systems: This segment’s sales of $2,515 million declined 7% year over year, due to lower volumes in Manned Aircraft, Autonomous Systems as well as Joint Surveillance and Target Attack Radar System (JSTARS) program.

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The unit’s operating income went down 23% to $237 million, whereas the operating margin contracted 200 basis points (bps) to 9.4%.

Mission Systems: Sales at this segment increased 3% to $2,563 million. This was due to higher restricted sales in the Networked Information Solutions business area as well as higher volume on SEWIP, marine systems programs and infrared countermeasure programs.

The unit’s operating income decreased 6% to $360 million, while the operating margin contracted 140 bps to 14%.

Defense Systems: This segment’s sales increased 7% to $1,376 million. This was driven by higher volume on the Integrated Air and Missile Defense Battle Command System program, ramp-up on the 120mm Tank Training ammunition program as well as higher volume on an international training program.

The unit’s operating income increased 3% to $160 million, while the operating margin contracted 50 bps to 11.6%.

Space Systems: Sales at this segment rose 17% to $3,350 million, driven by higher sales from both the Launch & Strategic Missiles as well as Space business areas.

The segment’s operating income improved 20% to $313 million, while the operating margin expanded 20 bps to 9.3%.

Operational Update

The company’s operating income during the quarter improved 5.6% to $947 million, driven by lower unallocated corporate expense and a reduction in the FAS/CAS operating adjustment

Financial Condition

Northrop Grumman’s cash and cash equivalents as of Mar 31, 2023 were $2,495 million, down from $2,577 million as of Dec 31, 2022.

Long-term debt (net of the current portion) was $13,770 million compared with $11,805 million as of Dec 31, 2022.

Northrop’s net cash outflow from operating activities as of Mar 31, 2023 was $702 million compared with the year-ago quarter’s figure of $488 million.

2023 Guidance

Northrop Grumman reiterated most of its financial guidance for 2023.

The company still expects revenues in the range of $38.00-$38.40 billion for 2023. The Zacks Consensus Estimate for the same stands at $38.28 billion, which is above the mid-point of the company’s guided range.

Adjusted earnings are now projected in the range of $22.25-$22.85 per share, up from the prior guided range of $21.85-$22.45 per share. The Zacks Consensus Estimate for the same stands at $22.04 per share, which lies lower than the company’s guided range.

NOC continues to expect adjusted free cash flow in the range of $1.85-$2.15 billion.

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 Corporation LMT reported first-quarter 2023 adjusted earnings of $6.43 per share, which beat the Zacks Consensus Estimate of $6.07 by 5.9%. However, the bottom line was in line with the year-ago quarter's reported figure.

Net sales amounted to $15.13 billion, which beat the Zacks Consensus Estimate of $14.87 billion by 1.9%. The top line rose 1.1% from $14.96 billion recorded in the year-ago quarter.

Hexcel Corporation HXL reported first-quarter 2023 adjusted earnings of 50 cents per share, which beat the Zacks Consensus Estimate of 39 cents by 28.2%. The bottom line improved massively from the year-ago quarter’s reported figure of 22 cents per share, highlighting solid growth of 127.3%.

Net sales totaled $458 million, which beat the Zacks Consensus Estimate of $428 million by 6.8%. Also, the top line witnessed a 17.2% improvement from the year-ago quarter’s $391 million.

Raytheon Technologies Corporation’s RTX first-quarter 2023 adjusted earnings of $1.22 per share beat the Zacks Consensus Estimate of $1.11 by 9.9%. The bottom line also improved 6% from the year-ago quarter’s reported figure of $1.15 per share.

Raytheon Technologies’ sales of $17,214 million beat the Zacks Consensus Estimate of $16,857 million by 2.1%. The figure also rose 9.5% from $15,716 million recorded in the year-ago quarter.

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