Summary
Northrop Grumman Corporation reported a solid first quarter for 2016, with net earnings increasing by 15% year-over-year to $556 million, or $3.03 per diluted share, up from $484 million, or $2.41 per diluted share, in the prior year period. This growth was primarily driven by a significantly lower effective tax rate, partly due to the adoption of a new accounting standard for share-based payments, which provided an $80 million tax benefit. Total sales remained relatively flat at $5.96 billion, as growth in Aerospace Systems was offset by declines in Mission Systems and Technology Services. The company also experienced a substantial improvement in net cash used in operating activities, which narrowed to $60 million from $654 million in the prior year, largely due to a significant pension contribution made in Q1 2015. While overall sales were stable, a key point for investors is the slight decrease in operating income by 5% to $739 million, leading to a compressed operating margin rate of 12.4% compared to 13.1% in the prior year. This was attributed to higher operating costs and expenses as a percentage of sales. The company's segment performance showed mixed results, with Mission Systems demonstrating a slight increase in operating income and margin, while Aerospace Systems saw a decrease in both. Technology Services reported declines in both sales and operating income. The company continues to actively manage its capital structure, with significant share repurchases completed under its 2014 program and ongoing repurchases under its 2015 program.
Financial Highlights
48 data points| Revenue | $5.96B |
| Cost of Revenue | $2.61B |
| Gross Profit | $3.35B |
| Operating Income | $739.00M |
| Net Income | $556.00M |
| EPS (Basic) | $3.07 |
| EPS (Diluted) | $3.03 |
| Shares Outstanding (Basic) | 181.30M |
| Shares Outstanding (Diluted) | 183.40M |
Key Highlights
- 1Net earnings increased by 15% to $556 million ($3.03 diluted EPS) in Q1 2016, driven by a lower effective tax rate.
- 2Total sales remained stable at $5.96 billion, with mixed segment performance (Aerospace Systems up, Mission Systems and Technology Services down).
- 3Operating income decreased by 5% to $739 million, and the operating margin rate compressed to 12.4% from 13.1% due to higher operating costs as a percentage of sales.
- 4Net cash used in operating activities significantly improved, decreasing by 91% to $60 million, largely due to a large pension contribution in the prior year.
- 5The company completed its $3.0 billion share repurchase program in March 2016 and has begun repurchases under a new $4.0 billion program, with $11 million repurchased as of March 31, 2016.
- 6The company reorganized its reporting segments from four to three effective January 1, 2016, combining Mission Systems and Technology Services.
- 7Aerospace Systems saw a 3% sales increase driven by Manned Aircraft and Autonomous Systems programs, but operating income and margin declined due to lower margins on key programs.