What is an Accelerated Share Repurchase (ASR) agreement?

An Accelerated Share Repurchase (ASR) agreement is a transaction where a company buys back its own stock from a financial institution, typically a bank. The company usually receives a portion of the shares immediately, and the final number of shares repurchased is determined at a later date based on the market price over a specified period.

Why is Northrop Grumman repurchasing its stock?

Northrop Grumman is repurchasing its stock as part of its commitment to returning capital to shareholders. This also suggests that management believes the company's stock is undervalued and that repurchasing shares is a good use of its capital.

How will this ASR affect the stock price?

Share repurchases generally have a positive impact on stock prices by reducing the number of outstanding shares, which can increase earnings per share (EPS) and make the stock appear more attractive to investors. The actual impact will depend on market conditions and investor sentiment at the time of completion.

When will the full impact of this share repurchase be seen?

The ASR agreement is expected to be completed in the second quarter of 2021. The full impact on the number of outstanding shares and potentially on earnings per share will be reflected in the company's financial statements following the completion of the transaction and final settlement.

NOC 8-K SEC Disclosure

Summary

Northrop Grumman Corporation (NOC) announced on February 1, 2021, that it has entered into a $2 billion accelerated share repurchase (ASR) agreement with Goldman Sachs. This move signals a strong commitment by the company to return capital to shareholders and reflects confidence in its financial position and future prospects. The ASR is part of the company's existing share repurchase authorization and is expected to be completed by the second quarter of 2021. Approximately 5.9 million shares are set to be repurchased initially, with the final number to be determined based on the volume-weighted average price of the stock during the ASR term, subject to a discount. This initiative is a significant capital allocation decision that could positively impact earnings per share by reducing the number of outstanding shares. Investors should monitor the completion of this repurchase and its impact on future financial statements.

Key Highlights

1Northrop Grumman entered into a $2 billion Accelerated Share Repurchase (ASR) agreement.
2The ASR is with Goldman Sachs & Co. LLC.
3The repurchase is part of the company's existing share repurchase authorization.
4Approximately 5.9 million shares are expected to be repurchased initially.
5The final number of shares repurchased will be based on the volume-weighted average price, less a discount.
6The ASR transaction is expected to be completed in the second quarter of 2021.
7This action demonstrates a commitment to returning capital to shareholders.

NORTHROP GRUMMAN CORP /DE/ 8-K Report, Corporate Update (Feb 1, 2021)

Summary

Key Highlights

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