Northrop Grumman Corp. ( NOC ) reported first
quarter 2013 results before the opening bell today. Adjusted
earnings per share of $1.94 easily surpassed the Zacks Consensus
Estimate of $1.73 and the year-ago figure of $1.88. The significant
upside in earnings was attributable to a lower share count and
strong operating performance.B/E AEROSPACE (BEAV): Free Stock Analysis
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Including pension adjustment of 9 cents per share, diluted
earnings per share from continuing operations were $2.03 compared
with $1.96 in the first quarter of 2012.
Sales in the reported quarter decreased 1.5% to $6.10 billion from
$6.20 billion in the year-ago quarter. However, quarterly revenues
surpassed the Zacks Consensus Estimate of $5.90 billion.
Northrop Grumman's total order backlog as of Mar 31, 2013 stood at
$39.4 billion, marginally down from $40.8 billion as of Dec 31,
2012. During the quarter under review, the company received new
contracts worth $4.7 billion. The decline in backlog reflects
customers' cautious response to the current U.S. government budget
During the reported quarter, cost of products and services
decreased marginally to $4.78 billion from $4.84 billion in the
prior-year quarter. General and administrative expenses also
declined to $558 million in the first quarter of 2013 from $561.0
million in the year-ago quarter.
The decline in product and service expenses, and general and
administrative expenses could not offset the decline in revenue.
Therefore, total operating income decreased to $759 million from
$796 million in first quarter of 2012. Operating margin was 12.4%
versus 12.8% in the year-ago quarter.
Segment operating margin was 12.3% versus 12.7% in the year-ago
Aerospace Systems: Aerospace Systems' quarterly
sales increased 4.3% year over year to $2.5 billion driven by
higher volume for manned military aircraft and unmanned programs,
partially offset by lower volume for space systems programs.
Electronic Systems: Electronic Systems sales
declined 0.17% year over year to $1.7 billion. This marginal
decline reflects higher volume for space and international programs
offset by lower volume for infrared countermeasures and laser
systems due to in-theater force reductions and lower volume for
combat avionics and maritime systems due to program
Information Systems: Information Systems sales
were $1.7 billion, down 9.2% year over year. The decline reflects
program completions, lower funding levels across the existing
program portfolio, and in-theater force reductions.
Technical Services: Technical Services' quarterly
sales decreased 4.4% year over year to $717 million due to
portfolio shaping actions and lower volume for the ICBM and KC-10
Cash and cash equivalents as of Mar 31, 2013 were $3.2 billion
versus $3.9 billion as of Dec 31, 2012. Long-term debt, net of
current portion as of Mar 31, 2013 was $3.9 billion, approximately
flat with the year-end 2012 level.
Cash from continuing operations during the quarter was $1 million
versus ($105) million in the year-ago quarter. Capital expenditure
was $40 million versus $81 million in the prior-year period.
During the first quarter of 2013, the company repurchased 6.5
million shares of its common stock for approximately $456 million.
Currently, the company has share repurchase authorization of $1.0
At the Peer
Recently, the world's largest stand-alone defense contractor,
Lockheed Martin Corp. ( LMT ) posted first
quarter 2013 adjusted earnings of $2.48 per share, comfortably
surpassing the Zacks Consensus Estimate of $2.01 by 23.4%.
For full-year 2013, Northrop Grumman expects to generate revenue
of approximately $24.0 billion. It expects earnings per share in
the range of $6.85 - $7.15. Currently, Northrop Grumman expects
total operating margin in the high 10% to low 11% range.
Northrop Grumman's top and bottom line results succeeded in
beating the Zacks Consensus Estimate on the back of strong
We are however concerned about the lower backlog at the end of the
reported quarter. This may be attributable to an uncertain
and constrained budget environment. Northrop's effective cash
deployment strategy, portfolio alignment and its focus on program
performance would to a large extent offset the headwinds. Northrop
Grumman currently carries a short-term Zacks #3 Rank (Hold).
In the aerospace and defense space, stocks worth considering are
Wesco Aircraft Holdings, Inc. ( WAIR ) and B/E
Aerospace Inc. ( BEAV ), both with a
Zacks Rank #2 (Buy).