10-QPeriod: Q2 FY2024

NORTHROP GRUMMAN CORP /DE/ Quarterly Report for Q2 Ended Jun 30, 2024

Filed July 25, 2024For Securities:NOC

Summary

Northrop Grumman Corporation (NOC) reported a solid second quarter and first half of 2024, demonstrating revenue growth and improved profitability. Total sales for the second quarter increased by 7% to $10.2 billion, and for the first half by 8% to $20.4 billion, driven by strong performance across all four operating sectors, particularly Aeronautics Systems. Net earnings saw a significant increase of 16% for the quarter, reaching $940 million, and 14% for the first half, totaling $1.88 billion. This improvement in earnings was largely attributed to higher operating income, favorable segment operating adjustments, and a reduction in unallocated corporate expenses. Diluted earnings per share also rose by 19% for the quarter and 17% year-to-date, reflecting the company's enhanced financial performance and effective share repurchase programs. The company maintains a strong backlog of $83.1 billion, providing visibility into future revenue streams.

Financial Highlights

51 data points
Beta

Revenue

$10.22B

Net Income

$940.00M

9.2% Net Margin

EPS (Diluted)

$6.36

Total Assets

$47.67B

Cash & Equivalents

$3.27B

Free Cash Flow

$1.10B

Financial Statements
Beta
Revenue$10.22B
Operating Expenses$9.13B
Operating Income$1.09B
Net Income$940.00M
EPS (Basic)$6.37
EPS (Diluted)$6.36
Shares Outstanding (Basic)147.50M
Shares Outstanding (Diluted)147.70M

Key Highlights

  • 1Total sales for Q2 2024 increased by 7% year-over-year to $10.2 billion, with all four sectors contributing to the growth.
  • 2Net earnings for Q2 2024 rose by 16% to $940 million, and by 14% to $1.88 billion for the first six months of the year.
  • 3Diluted earnings per share (EPS) saw a significant increase of 19% for Q2 2024 to $6.36 and 17% for the first half to $12.69.
  • 4Operating income increased by 13% for both the quarter and the year-to-date period, indicating improved operational efficiency.
  • 5The company's backlog remains strong at $83.1 billion as of June 30, 2024, providing good revenue visibility.
  • 6Free cash flow for the first six months of 2024 improved significantly to $129 million from a negative $396 million in the prior year period.
  • 7Northrop Grumman repurchased $1.75 billion of its stock in the first six months of 2024, contributing to the EPS growth.

Frequently Asked Questions

Revenue growth in the second quarter of 2024 was driven by increased sales across all four operating sectors, particularly Aeronautics Systems, which saw 14% growth. This was attributed to continued strong demand for Northrop Grumman's products and services, including higher restricted sales and volume increases in programs like Triton and GMLRS.

The company recognized a projected loss of $1.56 billion across the five LRIP options for the B-21 program in the fourth quarter of 2023. During the second quarter of 2024, no significant changes were made to this estimate, and the remaining loss accrual stands at $1.5 billion, impacting current and future results. The company continues to work with its suppliers and customer to manage costs and outcomes.

The Sentinel program underwent a Nunn-McCurdy breach review in January 2024 due to increased cost estimates. In July 2024, the program was recertified by the DoD, with a directive to restructure. Northrop Grumman made no significant changes to its Sentinel program profitability estimates in Q2 2024. The company is partnering with the customer to establish a new program baseline as part of the restructuring.

Northrop Grumman continues to focus on efficient cash conversion. They increased the quarterly common stock dividend by 10% and repurchased $1.75 billion of common stock in the first six months of 2024. The company also reported strong free cash flow generation of $129 million for the year-to-date period, an improvement from the previous year, and maintains a significant remaining authorization for share repurchases.