Northrop Grumman Corporation
) reported its third-quarter 2012 results before the opening bell
today. Adjusted earnings per share of $1.73 easily surpassed the
Zacks Consensus Estimate of $1.70 and the year-ago figure of
$1.63. The significant upside in earnings was attributable to
lower share count.
Including pension adjustment of 9 cents per share, diluted
earnings per share from continuing operations were $1.82 compared
with $1.86 in the third quarter of 2011.
Sales in the reported quarter decreased 5.2% to $6.27 billion
from $6.61 billion in the year-ago quarter. Quarterly revenues
also missed the Zacks Consensus Estimate of $6.33 billion.
Northrop Grumman's total order backlog as of September 30, 2012
stood at $41.0 billion, up marginally from $39.5 billion as of
December 31, 2011. During the quarter under review, the company
received new contracts worth $20.2 billion.
During the reported quarter, cost of products and services
decreased to $5.0 billion from $5.2 billion in the prior-year
quarter. General and administrative expenses also declined to
$572.0 million in third-quarter 2012 from $589.0 million in the
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 $736.0 million
from $825.0 million in third-quarter 2011. Operating margin was
11.7% versus 12.5% in the year-ago quarter.
Segment operating margin was 11.6% versus 11.8% in the year-ago
Aerospace Systems quarterly sales increased 5% year over year to
$2.6 billion due to higher volume for unmanned systems, primarily
consisting of NATO AGS and Fire Scout, and military aircraft
programs, mainly the F-35. These positive factors were partially
offset by termination of a weather satellite program in the space
systems and lower volume for restricted programs.
Electronic Systems sales declined 10% to $1.7 billion from $1.9
billion in the year-ago quarter. This decline reflects lower
volume for postal automation and combat avionics programs, and
infrared countermeasures and laser systems programs; partially
offset by higher volume for space systems programs.
Information Systems sales were $1.8 billion, down 9.2% than the
year-ago period, primarily due to lower volume for the defense
and intelligence systems programs related to termination of the
Joint Tactical Radio System Airborne, Maritime and Fixed ("JTRS
Technical Services' quarterly sales decreased 6% year over year
to $748 million due to lower volume for the logistics and
modernization programs, principally the KC-10 program, and
portfolio shaping actions for defense and government services
Cash and cash equivalents as of September 30, 2012 were $3.5
billion, up from $3.0 billion as of December 31, 2011. Long-term
debt, net of current portion as of September 30, 2012 was $3.9
billion, unchanged from the December 31, 2011 level.
Cash provided by continuing operations during the quarter were
$812.0 million versus $948.0 million in the year-ago quarter.
Capital expenditure was $64.0 million versus $109.0 million in
the prior-year period.
During the third quarter of 2012, the company repurchased 4.4
million shares of its common stock for approximately $290.0
million. Currently, the company is left with share repurchase
authorization of $2.0 billion.
General Dynamics Corporation
) announced its third-quarter 2012 operating earnings of $1.70
per share, falling short of the Zacks Consensus Estimate by 7
cents. It also missed the year-ago figure by 7.1%.
General Dynamics generated total revenue of $7.85 billion in the
reported quarter versus $7.93 billion in the year-ago quarter,
reflecting a growth of 1%. Reported quarter revenue also failed
to meet the Zacks Consensus Estimate of $8.05 billion.
For full-year 2012, Northrop Grumman expects to generate revenue
of approximately $25.0 billion, revised from its earlier
projection of $24.7 billion - $25.4 billion. It increased its
earnings per share projection to a band of $7.35 - $7.40 from the
prior range of $7.05 to $7.25 per share. Currently, Northrop
Grumman expects total operating margin to be at the high 11%
range versus its previous expectation of a mid 11% range.
Northrop Grumman reported mixed results in third-quarter 2012.
Quarterly earnings beat our projection, whereas revenue missed
estimates. The company expects earnings to increase going
Moreover, the company has been successful in generating solid
cash. The company still has $2.0 billion remaining under its
share repurchase authorization. Year to date, the company has
paid $401.0 million as dividend to its shareholders.
GENL DYNAMICS (GD): Free Stock Analysis
NORTHROP GRUMMN (NOC): Free Stock Analysis
To read this article on Zacks.com click here.
Overall, with a strong program portfolio, an improving balance
sheet and an ongoing share repurchase program, Northrop Grumman
seems to be well positioned to take advantage of its focus areas
in the defense space.
However, we are skeptical about the defense cutbacks on high-cost
platform programs, over-exposure to the Department of Defense
("DoD") budget, cost over-runs and reductions in Afghanistan
Northrop Grumman Corporation currently has short-term Zacks #3
Rank (Hold rating).
Falls Church, Virginia-based Northrop Grumman Corporation is one
of the largest defense contractors in the U.S. The company
supplies a broad array of products and services to the U.S. DoD,
including electronic systems, information technology, aircraft,
space technology, and systems integration services. With a market
capitalization of $17.22 billion, Northrop Grumman has 72,500