Northrop Grumman Corp.
) reported fourth quarter 2013 results before the opening bell
today. Adjusted earnings per share of $2.00 comfortably surpassed
the Zacks Consensus Estimate of $1.94 by 3.1%. The earnings beat
was attributable to a lower share count and strong operating
performance. However, the bottom line came in below the year-ago
figure of $2.06 by 2.9% mainly due to lower revenue generation.
Full year 2013 adjusted earnings came in at $7.88 per share,
below our forecast of $8.16 by 3.4%. Yet, the company managed to
lift its full year earnings on a year-over-year basis by 5.5%.
Sales in the reported quarter declined 4.9% to $6,157 million
from $6,476 million in the year-ago quarter. However, quarterly
revenues surpassed the Zacks Consensus Estimate of $6,019 million
In 2013, the company's top line slipped 2.2% year over year to
$24,661 million but beat the Zacks Consensus Estimate of $24,509
million. While revenues at the Aerospace and Electronics segments
increased, Information Systems and Technical Systems saw a
downward movement in revenues.
Northrop Grumman's total order backlog as of Dec 31, 2013 was
$37,033 million, down from $40,809 million as of Dec 31, 2012. Of
the backlog, $18,321 million belonged to Aerospace Systems and
$9,037 million to Electronics Systems. The rest of the backlog
comprised $6,864 million for Information Systems and $2,811
million for Technical Services.
During the quarter under review, the company received new
contracts worth $5.7 billion with a book-to-bill of 92%. For the
year 2013, new contracts totaled $21.9 billion and the
book-to-bill was 89%. The decline in backlog reflects a cautious
stance on the part of customers in response to the current U.S.
government budget environment.
Quarterly Segmental Revenue
Aerospace Systems' quarterly sales decreased 6.6% year over year
to $2,432 million. The decline reflects lower volume from
unmanned as well as space programs. These were, however,
partially offset by higher sales for the James Webb Space
Segment sales climbed 6.1% year over year to $1,883 million. The
increase reflects higher volume for international, combat
avionics as well as space programs. These increases were
partially offset by lower volume for navigation and maritime
Sales at the segment were $1,614 million, down 14.1% year over
year. The decline reflects lower funding levels and contract
completions across the board.
Technical Services' quarterly sales dropped 6.4% year over year
to $691 million due to lower volume for integrated logistics and
modernization programs and lower volume for the ICBM program.
Cash and cash equivalents as of Dec 31, 2013 were $5,150 million
versus $3,862 million as of Dec 31, 2012. Long-term debt, net of
current portion as of Dec 31, 2013 was $5,928 million versus
$3,930 million as of Dec 31, 2012. Net cash provided by operating
activities during 2013 decreased to $2,483 million from $2,640
million in the year-ago period.
During the fourth quarter of 2013, the company repurchased 6.6
million shares of its common stock, bringing the number to 20.8
million shares repurchased to date. Northrop has plans to buy
back 60 million shares of its outstanding common stock by the end
For full-year 2014, Northrop Grumman expects revenues between
$23,500 million and $23,800 million. Earnings per share are
expected in the range of $8.70 to $9.00 while the Zacks Consensus
Estimate for 2014 is lower at $8.53.
Northrop Grumman expects total operating margin on the higher
side of the 12% range and free cash flow in the $1,700-$2,000
At the Peers
Yesterday, aerospace giant
The Boeing Company
) reported stellar fourth quarter 2013 results on the back of
solid performance across the company's businesses and robust
deliveries. Its adjusted fourth quarter 2013 earnings came in at
$1.88 per share, beating the Zacks Consensus Estimate of $1.58 by
19.0% as well as the year-ago profit of $1.46 by 28.8%.
The world's largest stand-alone defense contractor,
Lockheed Martin Corp.
), posted fourth quarter 2013 adjusted earnings from continuing
operations of $2.38 per share, comfortably surpassing the Zacks
Consensus Estimate of $2.00 by 19.0%. Earnings in the reported
quarter also surged almost 21.4% from the year-ago adjusted
profit level of $1.96 per share. The upcast in earnings was
mainly attributable to its strong operational performance.
Defense and aerospace operator
General Dynamics Corp.
) fourth-quarter 2013 operating earnings were $1.76 per share, in
line with the Zacks Consensus Estimate. Earnings were ahead of
the year-ago figure of $1.39.
Northrop Grumman's top- and bottom-line results succeeded in
beating the Zacks Consensus Estimate driven by the company's
strong operational performance. The company continues to focus on
superior program performance, effective cash deployment and
portfolio alignment which would sustain the earnings surprise
However, the lower backlog at the end of the reported quarter
evokes concern. This is due to the uncertain and
constrained domestic budget environment.
Northrop Grumman currently carries a short-term Zacks Rank #2
(Buy), while Boeing and Lockheed Martin sport a Zacks Rank #1
BOEING CO (BA): Free Stock Analysis Report
GENL DYNAMICS (GD): Free Stock Analysis
LOCKHEED MARTIN (LMT): Free Stock Analysis
NORTHROP GRUMMN (NOC): Free Stock Analysis
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