Northrop Grumman Beats Q3 Earnings & Revenue Estimates
Northrop Grumman Corporation (NOC) reported third-quarter 2014 adjusted earnings of $2.32 per share, beating the Zacks Consensus Estimate of $2.16 by 7.4%. Earnings also increased 17.8% year over year from $1.97 a year ago.
Earnings increased on account of higher contribution from Aerospace segment and cost cutting measures.
Reported earnings before after-tax pension adjustments were $2.26 per share, up 5.6% year over year.
Northrop Grumman - Earnings Surprise | FindTheBest
Total Revenue
In third-quarter 2014, Northrop Grumman reported sales of $5.98 billion, surpassing the Zacks Consensus Estimate of $5.88 billion by 1.8%. However, quarterly revenues decreased nearly 2.0% year over year from $6.11 billion a year ago. The top-line decline was due to lower product and service revenues.
Quarterly Segmental Revenue
Aerospace Systems: Aerospace Systems’ quarterly sales increased 2.4% year over year to $2.5 billion. The increase can be attributed to the settlement of legal claims regarding the company's intellectual property and payments from a terminated program, partially offset by lower sales volume from manned military aircraft programs.
Electronic Systems: Segment sales edged down 2.3% year over year to $1.73 billion. This was primarily due to lower sales volume of combat avionics and infrared countermeasures products. Higher sales volume at space, marine and undersea programs partially offset the decline.
Information Systems: Sales at the segment were $1.51 billion, down 6.7% year over year. The decrease was primarily due to lower volumes across a large number of programs as funding remained weak. In-theater force reductions also negatively impacted revenues.
Technical Services: Technical Services’ quarterly sales dipped 3.1% year over year to $0.7 billion due to reduced volume at ICBM and Combined Tactical Training Range (:CTTR) programs which was offset by higher international sales.
Operational Update
Total operating cost and expenses were $5.22 billion, down 1.9% from the year-ago period.
Segment operating income in the reported quarter increased 10.1% year over year to $0.84 billion due to the settlement of legal claims regarding the company's intellectual property and a terminated program. Lower CAS pension costs also led to incremental margins.
Total order backlog as of Sep 30, 2014 was $38.54 billion, up 4.1% from $37.03 billion as of Dec 31, 2013.
Financial Condition
Northrop Grumman's cash and cash equivalents as of Sep 30, 2014 were $3.40 billion versus $5.15 billion as of Dec 31, 2013.
Long-term debt (net of current portion) as of Sep 30, 2014 was $5.93 billion versus $5.93 billion as of Dec 31, 2013.
Net cash from operating activities during the first nine months of 2014 was $1.10 billion compared with $1.28 billion in the year-ago period.
Guidance
Northrop Grumman now expects revenues for 2014 at the high end of its previous guidance of $23,500 million to $23,800 million.
The company increased its diluted earnings per share projection for 2014 to a band of $9.40–$9.50 per share from $9.15–$9.35 per share earlier.
Northrop Grumman reiterated its total operating margin guidance of 13% and free cash flow in the $1,700 million to $2,000 million range for 2014.
Peer Comparison
Lockheed Martin Corp. (LMT) reported quarterly earnings of $2.76 per share, comfortably surpassing the Zacks Consensus Estimate of $2.72 by 1.5%.
General Dynamics Corp. (GD) reported third-quarter 2014 earnings from continuing operations of $2.05 per share, comfortably surpassing the Zacks Consensus Estimate of $1.91 by 7.3%. Earnings also increased 11.4% from the prior-year figure of $1.84.
The Boeing Company (BA) reported adjusted third-quarter 2014 earnings of $2.14 per share, beating the Zacks Consensus Estimate by 9.2%. The quarterly number rose an impressive 18.9% from $1.80 per share a year ago.
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