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Northrop Grumman (NOC) Beats on Q2 Earnings, Ups '19 EPS View

Zacks Equity Research

Northrop Grumman Corporation NOC reported second-quarter 2019 earnings of $5.06 per share, which surpassed the Zacks Consensus Estimate of $4.64 by 9%. The bottom line also increased 12% from $4.50 reported in the year-ago quarter.

Total Sales

In second-quarter 2019, Northrop Grumman reported total sales of $8,456 million, which surpassed the Zacks Consensus Estimate of $8,401 million by 0.7%. Sales also increased 19% from the year-ago quarter’s $7,119 million. The upside was primarily driven by solid single-digit increase in the Mission Systems’ sales.

Segmental Details

Aerospace Systems: Sales at this segment totaled $3,390 million, up 2% year over year. This improvement was backed by increased sales due to higher volumes of Manned Aircraft and Space programs.

Operating income rose 1% to $361 million, whereas operating margin contracted 10 basis points (bps) to 10.6%.

Mission Systems: Segment sales increased 9% to $3,128 million on higher sales in Cyber and ISR, Advanced Capabilities, and Sensors and Processing business areas.

Operating income rose 15.9% to $408 million while operating margin expanded 80 bps to 13%.

Technology Services: Sales at this segment dipped 0.4% to $1,044 million, owing to lower Global Services sales.

Operating income increased 19% to $113 million, with operating margin expansion of 170 bps to 10.8%.

Innovation Systems: Second-quarter 2019 sales in this segment increased 8% to $1,498 million compared with proforma sales of $1,400 million in the second quarter of 2018. The increase was principally due to higher sales at Flight Systems and Defense Systems.

Meanwhile, the segment’s operating income totaled $169 million and operating margin expanded 150 bps to 11.3%.

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

Operational Update

Total operating costs and expenses at the end of the quarter were $7,510 million, up 19.2% from the year-ago quarter’s $6,302 million.

Operating income during the quarter increased 15.8% to $946 million.

Financial Condition

Northrop Grumman’s cash and cash equivalents as of Jun 30, 2019, were $1,088 million, down from $1,579 million as of Dec 31, 2018.

Long-term debt (net of current portion) as of Jun 30, 2019, was $13,838 million, down from $13,883 million as of Dec 31, 2018.

Net cash inflow from operating activities as of Jun 30, 2019, was $694 million compared with $638 million as of Jun 30, 2018.

2019 Guidance

Northrop Grumman expects to generate revenues of $34 billion during 2019. The Zacks Consensus Estimate for the company’s full-year sales, pegged at $33.91 billion, lies below its projected view.

It continues to project free cash flow of $2.6-$3 billion for 2019.

However, Northrop Grumman raised its full-year earnings expectations from $18.90-$19.30 to $19.30-$19.55 per share. The Zacks Consensus Estimate for the company’s 2019 earnings, pegged at $19.41, lies slightly below the mid-point 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

Textron Inc. TXT reported second-quarter 2019 earnings from continuing operations of 93 cents per share, which surpassed the Zacks Consensus Estimate of 85 cents by 9.4%. The bottom line also increased 6.9% from 87 cents in the year-ago quarter.

Lockheed Martin Corp. LMT reported second-quarter 2019 earnings of $5 per share, which surpassed the Zacks Consensus Estimate of $4.74 by 5.5%. The bottom line also improved 23.5% from $4.05 in the year-ago quarter.

Upcoming Defense Releases

Raytheon Company RTN is scheduled to report second-quarter 2019 results on Jul 25.

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