10-KPeriod: FY2016

NORTHROP GRUMMAN CORP /DE/ Annual Report, Year Ended Dec 31, 2016

Filed January 30, 2017For Securities:NOC

Summary

Northrop Grumman Corporation's (NOC) 2016 10-K filing highlights a strong year characterized by a significant increase in sales and operating income, primarily driven by growth in the Aerospace Systems and Mission Systems segments. The company reported robust backlog growth, reaching $45.3 billion, indicating strong future revenue potential. A key focus for investors will be the company's substantial reliance on the U.S. Government, which accounted for 84% of sales, underscoring the importance of government spending and contract awards. NOC also demonstrated a commitment to shareholder returns, increasing dividends per share and actively repurchasing shares. While the company navigates a dynamic global security environment and the complexities of U.S. government contracting, its diversified portfolio across autonomous systems, cyber, C4ISR, strike, and logistics and modernization positions it well for continued performance.

Financial Highlights

52 data points
Beta

Revenue

$24.51B

55.1% Gross Margin

Net Income

$2.04B

8.3% Net Margin

EPS (Diluted)

$11.32

Total Assets

$25.61B

Cash & Equivalents

$2.54B

Free Cash Flow

$1.89B

Financial Statements
Beta
Revenue$24.51B
Cost of Revenue$11.00B
Gross Profit$13.51B
R&D Expenses$705.00M
Operating Income$3.28B
Net Income$2.04B
EPS (Basic)$11.42
EPS (Diluted)$11.32
Shares Outstanding (Basic)178.90M
Shares Outstanding (Diluted)180.50M

Key Highlights

  • 1Total backlog significantly increased to $45.3 billion at year-end 2016, up from $35.9 billion in 2015, indicating strong future revenue visibility.
  • 2Sales grew by 4% to $24.5 billion in 2016, with the Aerospace Systems segment showing a notable 9% increase.
  • 3Operating income rose by 4% to $3.2 billion in 2016, driven by higher sales volume and reduced unallocated corporate expenses.
  • 4The company repurchased $1.5 billion in common stock during 2016, demonstrating a commitment to returning capital to shareholders.
  • 5Dividends per common share increased to $3.50 in 2016 from $3.10 in 2015, reflecting confidence in ongoing financial performance.
  • 6The U.S. Government remained the dominant customer, representing 84% of total sales, highlighting the company's deep integration with national defense.
  • 7The company's effective tax rate decreased to 24.7% in 2016 from 28.7% in 2015, partly due to favorable tax adjustments.

Frequently Asked Questions

Northrop Grumman's sales grew by 4% to $24.5 billion in 2016. This growth was primarily driven by higher sales in the Aerospace Systems segment, which increased by 9%, and the Mission Systems segment, which saw a 2% increase. This growth was largely attributable to increased volume on key programs within these segments.

While the U.S. Government accounted for 84% of Northrop Grumman's sales in 2016, the company operates across three diverse segments: Aerospace Systems, Mission Systems, and Technology Services. This diversification across different defense and government capabilities, including autonomous systems, cyber, C4ISR, strike, and logistics, helps mitigate risks associated with a single customer. The company's strategic focus on high-priority defense programs also aligns with government needs.

Northrop Grumman experienced substantial growth in its total backlog, increasing by 26% to $45.3 billion at the end of 2016 from $35.9 billion in 2015. This significant increase in backlog is a positive indicator for investors, suggesting strong future revenue streams and ongoing demand for the company's products and services. Approximately $18.2 billion of this backlog is expected to convert to sales in 2017.

Northrop Grumman demonstrated its commitment to shareholder returns in 2016 through both share repurchases and dividend increases. The company repurchased approximately $1.5 billion of its common stock and increased its quarterly dividend per share to $0.90, up from $0.80 in the previous year. These actions reflect confidence in the company's financial health and its ability to generate consistent returns.