Summary
Northrop Grumman Corporation reported strong top-line growth in the second quarter and first half of 2018, with total sales increasing by 10% and 8% year-over-year, respectively. This growth was significantly driven by the acquisition of Orbital ATK, which was completed in June 2018 and contributed $400 million in sales to the new Innovation Systems segment. Despite revenue growth, operating income saw a slight decrease of 6% for the quarter and 3% year-to-date, primarily due to increased unallocated corporate expenses related to the acquisition and a lower operating margin rate. Net earnings, however, showed a significant increase of 24% for the quarter and 19% year-to-date, largely benefiting from a lower effective tax rate due to the Tax Cuts and Jobs Act of 2017 and favorable adjustments related to pension benefits. Key financial metrics reflect the impact of the Orbital ATK acquisition, which added substantial goodwill and intangible assets, contributing to an increase in total assets. The company's backlog also saw a significant increase, reflecting future revenue potential. While the acquisition is expected to broaden capabilities and create shareholder value, investors should monitor the integration progress and its impact on future profitability and operational efficiency. The company's liquidity remains strong, supported by operating cash flow and available credit facilities.
Financial Highlights
52 data points| Revenue | $7.12B |
| Cost of Revenue | $3.69B |
| Gross Profit | $3.42B |
| R&D Expenses | $764.00M |
| Operating Income | $817.00M |
| Net Income | $789.00M |
| EPS (Basic) | $4.52 |
| EPS (Diluted) | $4.50 |
| Shares Outstanding (Basic) | 174.50M |
| Shares Outstanding (Diluted) | 175.40M |
Key Highlights
- 1Total sales increased by 10% to $7.1 billion for the quarter and 8% to $13.9 billion for the first half of 2018, largely driven by the integration of Orbital ATK.
- 2Net earnings increased by 24% to $689 million for the quarter and 19% to $1.4 billion for the first half, significantly boosted by a lower effective tax rate and favorable pension adjustments.
- 3Operating income decreased by 6% for the quarter and 3% for the first half, primarily due to increased acquisition-related corporate expenses and a reduced operating margin rate.
- 4The acquisition of Orbital ATK was completed on June 6, 2018, adding $400 million in sales and establishing the new Innovation Systems segment, with $6.3 billion in goodwill recognized.
- 5Backlog grew to $52.2 billion as of June 30, 2018, up from $42.6 billion at the end of 2017, indicating strong future revenue prospects.
- 6Diluted Earnings Per Share (EPS) showed robust growth, up 24% to $3.93 for the quarter and 19% to $8.14 for the first half, aligning with net earnings growth.
- 7Effective income tax rate decreased significantly to 18.8% for the quarter and 17.0% for the first half, compared to 31.7% and 24.7% respectively in the prior year, due to tax reforms.