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Northrop Grumman (NOC) Q4 Earnings Beat, Revenues Rise Y/Y

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Zacks Equity Research
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Northrop Grumman Corporation NOC reported fourth-quarter 2020 earnings of $6.59 per share, beating the Zacks Consensus Estimate of $5.70 by 15.6%. Reported earnings also improved 17.5% from $5.61 in the year-ago quarter.

For 2020, earnings were $23.65 per share, up 11.5% from the year-ago quarter. Moreover, 2020 earnings exceeded the Zacks Consensus Estimate of $22.72 by 4.1%.

Total Revenues

In fourth-quarter 2020, Northrop Grumman reported total revenues of $10,212 million, surpassing the Zacks Consensus Estimate of $9,235 million by 10.6%.

Moreover, revenues increased 17% from the year-ago quarter’s $8,721 million. The year-over-year upside was primarily driven by a 24% increase in Aeronautics systems sales, 31% in Space Systems sales and 10% in Mission Systems sales.

In 2020, total revenues grew 9% year over year to $36,799 million. Full-year revenues also exceeded the Zacks Consensus Estimate of $35,820 million by 2.7%.

Segmental Details

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

Aeronautics Systems: Segment sales of $3,487 million grew 34% year over year as a result of higher sales from manned aircraft.

Operating income improved 10% to $339 million, whereas operating margin contracted 130 basis points (bps) to 9.7%.

Mission Systems: Segment sales increased 10% to $2,736 million, driven by higher sales volumes from airborne sensors and network sales; increased navigation, targeting & survivability sales; cyber & intelligence mission solutions sales; and elevated maritime/land systems & sensors sales.

Operating income, however, declined 2% to $389 million, while operating margin contracted 170 bps to 14.2%.

Defense Systems: Sales in this segment grew 2% to $1,917 million owing to higher volumes in mission readiness programs.

Operating income increased 22% to $214 million, while operating margin expanded 180 bps to 11.2%.

Space Systems: Space Systems’ fourth-quarter 2020 sales rose 31% to $2,550 million owing to higher sales from both Space and Launch & Strategic Missiles programs.

The segment’s operating income improved 17% to $258 million, whereas operating margin contracted 120 bps to 10.1%.

Operational Update

Total operating costs and expenses at the end of the quarter were $32,734 million, up 9.6%.

Operating income during the quarter increased 2.4% to $4,065 million.

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

Financial Condition

Northrop Grumman’s cash and cash equivalents as of Dec 31, 2020, were $4,907 million, up from $2,245 million as of Dec 31, 2019.

Long-term debt (net of current portion) as of Dec 31, 2020, was $14,261 million, down from $12,770 million as of 2019-end.

Net cash inflow from operating activities as of Dec 31, 2020, was $4,305 million compared with $4,297 million as of Dec 31, 2019.

2021 Guidance

Northrop Grumman currently expects to generate revenues of $35.1-$35.5 billion during 2021. The Zacks Consensus Estimate for revenues, pegged at $37.51 billion, is higher than the guided range.

The 2021 earnings are expected to be $23.15-$23.65 per share. The Zacks Consensus Estimate for EPS, pegged at $23.99, lies above the guided range.

Zacks Rank

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

Recent Defense Releases

Lockheed Martin Corp. LMT, a Zacks Rank #3 (Hold) company, reported fourth-quarter 2020 earnings from continuing operations of $6.38 per share, which came in line with the Zacks Consensus Estimate. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Hexcel Corporation HXL, a Zacks Rank #3 company, reported fourth-quarter 2020 loss of 18 cents per share, in line with the Zacks Consensus Estimate.

General Dynamics Corporation GD reported fourth-quarter 2020 earnings from continuing operations of $3.49 per share, which missed the Zacks Consensus Estimate of $3.55 by 1.7%.

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