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

Zacks Equity Research

Northrop Grumman Corporation NOC reported fourth-quarter 2019 earnings of $5.61 per share, beating the Zacks Consensus Estimate of $4.78 by 17.4%. Reported earnings also improved 13.8% from $4.93 in the year-ago quarter.

For 2019, earnings were $21.21 per share, down 0.56% from the year-ago quarter. However, 2019 earnings exceeded the Zacks Consensus Estimate of $20.39 by 4%.

Total Revenues

In fourth-quarter 2019, Northrop Grumman reported total revenues of $8,721 million, missing the Zacks Consensus Estimate of $8,828 million by 1.2%. However, revenues increased 6.9% from the year-ago quarter’s $8,156 million. The year-over-year upside was primarily driven by a 10% increase in Aerospace systems sales, 9% in Innovation Systems sales and 6% in Mission Systems sales.

In 2019, total revenues increased 12.4% year over year to $33,841 million. Full-year revenues, however, missed the Zacks Consensus Estimate of $33,960 million by a mere 0.35%.

Segmental Details

Aerospace Systems: Segment sales of $3,518 million grew 10% year over year as a result of higher volumes of manned aircraft, autonomous systems and space programs.

Operating income rose 9% to $367 million, whereas operating margin contracted 10 basis points (bps) to 10.5%.

Mission Systems: Segment sales increased 6% to $3,220 million owing to higher sales volume of Advanced Capabilities, Cyber, ISR, and Sensors and Processing systems.

Operating income rose 13% to $450 million, with the operating margin expanding 90 bps to 14%.

Technology Services: Sales at this segment dropped 4% to $1,022 million, primarily due to lower Global Logistics and Modernization sales.

Operating income declined 8% to $106 million, with the operating margin contracting 40 bps to 10.4%.

Innovation Systems: Innovation Systems’ fourth-quarter 2019 proforma sales increased 9% to $1,599 million from $1,461 million proforma sales in the fourth quarter of 2018. The increase was owing to higher volumes for Space Systems, Flight Systems and Defense Systems.

The segments’ operating income totaled $171 million and the operating margin expanded 90 bps to 10.7%.

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 $29,872 million, up 13.6%.

Operating income during the quarter increased 5% to $3,969 million.

Financial Condition

Northrop Grumman’s cash and cash equivalents, as of Dec 31, 2019, were $2,245 million, up from $1,579 million, as of Dec 31, 2018.

Long-term debt (net of current portion), as of Dec 31, 2019, was $12,770 million, down from $13,883 million, as of 2018-end.

Net cash inflow from operating activities, as of Dec 31, 2019, was $4,297 million compared with $3,827 million, as of Dec 31, 2018.

2020 Guidance

Northrop Grumman currently expects to generate revenues of $35.3-$35.8 billion during 2020. The company expects free cash flow of $3.15-$3.45 billion in 2019. The 2020 earnings are expected to be $22.75-$23.15 per share.

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.

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