Northrop Grumman Corp.
) reported third quarter 2013 results before the opening bell
today. Adjusted earnings per share of $1.97 comfortably surpassed
the Zacks Consensus Estimate of $1.81. Also, the figure was above
the year-ago figure by 13.9%. The significant upside in earnings
was attributable to a lower share count and strong operating
Sales in the reported quarter declined 2.6% to $6,106 million
from $6,270 million in the year-ago quarter. However, quarterly
revenues surpassed the Zacks Consensus Estimate of $5,935 million
Northrop Grumman's total order backlog as of Sep 30, 2013 was
$37,518 million, down from $40,809 million as of Dec 31, 2012. Of
the backlog, $18,563 million belonged to the Aerospace Systems
and $8,770 million to the Electronics Systems segments. The rest
is made up of $7,335 million for Information Systems and $2,850
million for Technical Services
During the quarter under review, the company received new
contracts worth $5.9 billion. The decline in backlog reflects
customers' cautious response to the current U.S. government
During the reported quarter, cost of products and services
decreased to $4,761 million from $4,962 million in the prior-year
quarter. General and administrative expenses declined 2.3% year
over year to $555 million.
The decline in revenue was partly mitigated by a cut in operating
expenses, thereby leading to a 7.3% rise in operating income to
Aerospace Systems' quarterly sales decreased 3.9% year over year
to $2,484 million. The decline reflects lower volume for manned
military aircraft and unmanned programs. These were, however,
partially offset by higher sales for space programs.
Segment sales were up 3.9% year over year to $1,774 million. The
increase reflects higher volume for international and combat
avionics programs. These increases were partially offset by lower
volume for navigation and maritime systems programs.
Sales at the segment were $1,619 million, down 8.8% year over
year. The decline reflects portfolio reshaping initiatives.
Excluding the company's efforts to reshuffle the business, sales
were down 8% due to lower funding levels and contract completions
across the board.
Technical Services' quarterly sales decreased 4.7% year over year
to $713 million due to lower volume for integrated logistics and
modernization programs and lower volume for the ICBM program.
Cash and cash equivalents as of Sep 30, 2013 were $4.9 billion
versus $3.9 billion as of Dec 31, 2012. Long-term debt, net of
current portion as of Sep 30, 2013 was $5.9 billion versus $3.9
billion as of Dec 31, 2012. Net cash provided by operating
activities during the quarter increased to $950 million from $812
million in the year-ago period.
During the third quarter of 2013, the company repurchased 8.1
million shares of its common stock, bringing the number to 20.6
million shares repurchased to date.
For full-year 2013, Northrop Grumman increased its revenue
guidance to $24.4 billion from its prior expectation of
approximately $24.3 billion. The company expects earnings per
share in the range of $8.00 to $8.15 versus its prior expectation
of $7.60 to $7.80. Currently, Northrop Grumman expects total
operating margin approximately in the low-to-mid 12% range versus
its prior expectation of 12%.
At the Peer
Lockheed Martin Corp.
) posted third quarter 2013 earnings of $2.57 per share,
comfortably surpassing the Zacks Consensus Estimate of $2.26 by
13.7%. Earnings in the reported quarter also surged almost 16.3%
from the year-ago profit level of $2.21 per share.
Defense and aerospace operator
General Dynamics Corp.
) today announced third quarter 2013 operating earnings of $1.84
per share, surpassing the Zacks Consensus Estimate of $1.68 by
9.5%. Earnings were also ahead of the year-ago figure of $1.70,
backed by robust aerospace activity.
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
We are, however, a little concerned about the lower backlog at
the end of the reported quarter. This is due to the
uncertain and constrained budget environment.
Northrop Grumman currently carries a short-term Zacks #1 Rank
(Strong Buy). We also have
Erickson Air-Crane Inc.
) in the space with a Zacks Rank #2.
ERICKSON AIR-CR (EAC): Free Stock Analysis
GENL DYNAMICS (GD): Free Stock Analysis
NORTHROP GRUMMN (NOC): Free Stock Analysis
To read this article on Zacks.com click here.