10-QPeriod: Q2 FY2022

NORTHROP GRUMMAN CORP /DE/ Quarterly Report for Q2 Ended Jun 30, 2022

Filed July 28, 2022For Securities:NOC

Summary

Northrop Grumman Corporation reported its financial results for the second quarter and first half of 2022. Total sales for the second quarter were $8.8 billion, a decrease of 4% compared to the prior year, primarily driven by lower sales in Aeronautics Systems, Defense Systems, and Mission Systems, partially offset by growth in Space Systems. Net earnings for the quarter were $946 million, down 9% year-over-year, with diluted EPS at $6.06, a 6% decrease. For the first half of the year, total sales were $17.6 billion, a 4% decrease, and net earnings were $1.9 billion, a significant 41% decrease, largely influenced by the prior year's gain on the sale of the IT services business. Despite revenue headwinds and macroeconomic factors like labor shortages and supply chain challenges, the company maintained a substantial backlog of $80.0 billion as of June 30, 2022, with a significant portion expected to convert to revenue over the next two years. The company also continued its commitment to shareholder returns through share repurchases and dividend increases.

Financial Highlights

50 data points
Beta

Revenue

$8.80B

Net Income

$946.00M

10.7% Net Margin

EPS (Diluted)

$6.06

Total Assets

$41.91B

Cash & Equivalents

$1.17B

Free Cash Flow

-$460.00M

Financial Statements
Beta
Revenue$8.80B
Operating Expenses$7.85B
Operating Income$954.00M
Net Income$946.00M
EPS (Basic)$6.09
EPS (Diluted)$6.06
Shares Outstanding (Basic)155.40M
Shares Outstanding (Diluted)156.00M

Key Highlights

  • 1Total sales for Q2 2022 were $8.8 billion, down 4% year-over-year, with year-to-date sales at $17.6 billion, also down 4%.
  • 2Net earnings for Q2 2022 were $946 million, a 9% decrease from Q2 2021, and year-to-date net earnings were $1.9 billion, a 41% decrease, significantly impacted by the prior year's gain on the sale of the IT services business.
  • 3Diluted EPS for Q2 2022 was $6.06, a 6% decrease from $6.42 in the prior year. Year-to-date diluted EPS was $12.16, a 39% decrease.
  • 4The company ended the period with a substantial backlog of $80.0 billion as of June 30, 2022, providing visibility into future revenue.
  • 5Operating income for Q2 2022 was $954 million, down 9% year-over-year. The operating margin rate decreased to 10.8% from 11.4% in the prior year.
  • 6Space Systems segment showed growth with an 8% increase in sales for Q2 2022 and an 11% increase year-to-date, driven by development programs and specific contracts.
  • 7The company continued to return capital to shareholders, repurchasing $640 million of its stock in the first half of 2022 and increasing its quarterly dividend by 10%.

Frequently Asked Questions

For the second quarter of 2022, Northrop Grumman reported total sales of $8.8 billion, a 4% decrease compared to the same period in 2021. Net earnings were $946 million, a 9% decrease, resulting in diluted EPS of $6.06. For the first half of 2022, sales were $17.6 billion (down 4%), and net earnings were $1.9 billion, a significant 41% decrease, largely due to a large gain on the sale of its IT services business in the prior year. The company is navigating macroeconomic headwinds, including supply chain challenges and labor market tightness.

Northrop Grumman ended the second quarter of 2022 with a robust backlog of $80.0 billion. This represents future sales from firm orders and signals significant revenue visibility. The company expects to recognize approximately 40% of this backlog over the next 12 months and 60% over the subsequent 24 months, indicating a strong revenue pipeline.

Sales have been impacted by lower volumes in certain segments, particularly Aeronautics Systems and Defense Systems, alongside broader macroeconomic challenges such as labor shortages and extended material lead times. Profitability has been affected by these sales declines, changes in FAS/CAS operating adjustments, and increased investments in future business opportunities. The comparison to the prior year is also significantly influenced by the large gain from the IT services divestiture in 2021.

Northrop Grumman is actively managing its capital. In the first half of 2022, the company repurchased $640 million of its common stock and increased its quarterly dividend by 10% to $1.73 per share. The company has $3.5 billion remaining under its share repurchase authorizations as of June 30, 2022.