Northrop Grumman Corporation
) reported impressive first quarter 2012 results. Earnings of $1.88
per share compared favorably with $1.44 per share posted in the
first quarter of 2010. Northrop results also exceeded the Zacks
Consensus Estimate of $1.59 for the quarter.
The upside in earnings was attributable to an improved
performance besides lower costs and share count.
Sales for the reported quarter decreased 7.9% to $6.19 billion,
from $6.73 billion in the year-ago quarter, and were 1.0% lower
than the Zacks Consensus Estimate of $6.26 billion.
Aerospace Systems quarterly sales declined 8.1% year over year
to $2.4 billion, principally due to lower volume for manned
military aircraft and space programs. Military aircraft sales
suffered from lower F-35 and Joint STARS as well as fewer F/A-18
deliveries. Space systems sales were affected by lower volume for
restricted programs and the cancellation of a weather satellite
Electronic Systems sales declined 4.6% to $1.7 billion from $1.8
billion in the year-ago quarter. The year-over-year shortfall in
revenue was due to lower volume for programs in intelligence,
surveillance and reconnaissance, and targeting systems (ISR&T)
and navigation systems programs.
Information Systems sales of $1.9 billion were 8.9% lower than
the year-ago period, principally due to lower volumes in all its
Technical Services sales decreased 9.7% to $750 million due to
portfolio shaping to improve performance.
During the reported cost of product and service decreased by
9.6% to $4.8 billion from $5.3 billion in the prior-year quarter.
General and administrative expenses decreased by $7 million
from the prior year to $561 million.
In the reported quarter, operating income was $796 million
reflecting a 2% drop year over year. However, operating margin
expanded 80 basis points to 12.8% on the back of reduced costs.
Interest expenses were $53 million versus $58 million in the
prior year, reflecting a small dip in the debt level.
Cash and cash equivalents as of March 31, 2012 were $2.68
billion versus $3 billion as of December 31, 2011.
Long-term debt as of March 31,2012 were $3.9 billion, unchanged
from the 2011 end level.
Capital expenditure during the quarter under review was $81
million versus $123 million in the year-ago quarter.
), which competes with Northrop Grumman Corporation, is expected to
report its first quarter 2012 earnings on April 26, 2012.
The Zacks Consensus Estimate, for revenue and earnings per share
for first quarter 2012, is presently pegged at $5,772 million and
$1.16 per share, respectively.
Northrop Grumman's total order backlog at the end of the first
quarter of 2012 stood at $39.1 billion verses $39.5 billion at
fiscal-end 2011. Despite receiving new contracts worth $5.8 billion
during the quarter, the backlog effectively declined by $381
million from the 2011 year-end level.
For 2012, the company affirmed its revenue guidance in the range
of $24.7 billion to $25.4 billion but increased it earnings per
share projection to a band of $6.70 to $6.95 from the prior range
of $6.40 to $6.70 per
Northrop managed to surpass our earnings estimate and guided
higher for the fiscal year. However, we believe the gradual decline
in backlog is a cause of concern.
It is encouraging to see that the company is consistently
working to increase shareholder value. During the quarter, the
company repurchased 4.4 million shares for $263 million. The
company still has $1.4 billion remaining in its share repurchase
authorization. Besides, the company also paid $127 million for
dividends to its shareholders.
The stock retains a Zacks #4 Rank, which translates into a
short-term Sell rating.
Northrop Grumman Corporation is a leading global security
company providing innovative systems, products and solutions in
aerospace, electronics, information systems, and technical services
to government and commercial customers worldwide.
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