01—Abstract
Summary
Summary of the 10-Q filed July 29, 2021. Cited figures are marked; the original filing is the authoritative source.
Northrop Grumman Corporation (NOC) reported solid financial results for the six months ended June 30, 2021, driven significantly by the divestiture of its IT and mission support services business, which generated a substantial pre-tax gain of $2.0 billiona.
Despite this one-time gain, the company demonstrated strong underlying performance with an 11% increase in organic sales year-over-year, reaching $18.1 billionb. Net earnings saw a significant jump to $3.23 billion, largely due to the divestiture gain, though adjusted net earnings also grew by a healthy 13% to $2.11 billion, reflecting operational improvements across its segments. The company's backlog remains robust at $76.6 billion, providing good visibility into future revenue.
While the overall backlog saw a slight decrease, this was primarily due to the IT services divestiture. The company continues to focus on key defense programs, particularly in space, missiles, and autonomous systems, and is navigating a complex geopolitical and economic environment.
Shareholder returns were supported by significant share repurchases and an increased dividend. The company's financial position appears stable, with adequate liquidity to fund operations.
02—Key points
Key Highlights
- Completed the sale of its IT and mission support services business for $3.4 billion, recognizing a $2.0 billion pre-tax gain.
- Achieved 11% year-over-year growth in organic sales to $18.1 billion for the six months ended June 30, 2021.
- Total sales increased by 5% to $18.3 billion for the six months ended June 30, 2021.
- Operating income surged by 101% to $3.87 billion for the six months ended June 30, 2021, primarily due to the IT services divestiture gain.
- Diluted EPS increased significantly by 78% to $19.89 for the six months ended June 30, 2021, largely influenced by the divestiture.
- Maintained a substantial backlog of $76.6 billion as of June 30, 2021, providing a strong base for future revenue.
- Returned capital to shareholders through $2.1 billion in share repurchases and $486 million in dividends paid during the first six months of 2021.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2021filed July 29, 2021Financial Statements
Q2 FY2021 against Q2 FY2020
| Line item | Q2 FY2021Q2 FY2020 | Change |
|---|---|---|
| Revenue | $9.15B$8.88B | +3.0% |
| Operating Expenses | $8.11B$7.89B | +2.8% |
| Operating Income | $1.04B$994.00M | +5.0% |
| Net Income | $1.04B$1.00B | +3.2% |
| EPS (Basic) | $6.44$6.02 | +7.0% |
| EPS (Diluted) | $6.42$6.01 | +6.8% |
| Shares Outstanding (Basic) | 161.00M166.90M | −3.5% |
| Shares Outstanding (Diluted) | 161.50M167.30M | −3.5% |
05—Questions
Frequently Asked Questions
What was the primary driver for the significant increase in net earnings and operating income?
The primary driver for the substantial increase in net earnings and operating income for the six months ended June 30, 2021, was the divestiture of Northrop Grumman's IT and mission support services business. This transaction resulted in a pre-tax gain on sale of $2.0 billion and significantly boosted reported financial figures.
How did the company's core business perform excluding the impact of the IT divestiture?
Excluding the IT services divestiture, Northrop Grumman demonstrated strong underlying performance. Organic sales grew by 11% to $18.1 billion for the six months ended June 30, 2021, indicating healthy growth in its continuing operations across segments like Space Systems and Mission Systems.
What is the current status of the company's backlog, and what does it represent?
As of June 30, 2021, the company's total backlog stood at $76.6 billion. This backlog represents future sales expected from firm orders received, equivalent to the company's remaining performance obligations. While it decreased slightly, this was largely due to the reduction from the IT services divestiture. Approximately 40% of this backlog is expected to be recognized as revenue over the next 12 months.
How is the company managing its capital and returning value to shareholders?
Northrop Grumman is actively managing its capital. For the six months ended June 30, 2021, the company repurchased approximately $2.1 billion of its common stock and paid $486 million in dividends. The dividend per share was also increased by 8% in May 2021. The company also had $3.9 billion in cash and cash equivalents as of June 30, 2021, and sufficient liquidity to fund operations.
06—Continue