Northrop Grumman (NOC) Misses Q1 Earnings, Cuts '20 EPS View
Northrop Grumman Corporation NOC reported first-quarter 2020 earnings of $5.15 per share, which missed the Zacks Consensus Estimate of $5.42 by 5%. However, the bottom line rose 1.8% from $5.06 in the year-ago quarter.
Northrop Grumman reported total salesof $8,620 million for the first quarter, surpassing the Zacks Consensus Estimate of $8,474 million by 1.7%. Moreover, revenues increased 5.3% from the year-ago quarter’s $8,189 million. The year-over-year upside was primarily driven by an 8% increase in Space Systems sales, 6% in Defense Systems sales and 6% in Mission Systems sales.
Northrop Grumman’s total backlog stood at $64.17 billion at the end of first-quarter 2020, compared with $64.84 billion at 2019-end. Of the total backlog, $32.52 billion was funded.
Northrop Grumman Corporation Price, Consensus and EPS Surprise
Effective Jan 1, 2020, Northrop made some structural changes in its reportable segments. Here are its new segments:
Aeronautics Systems: Segment sales of $2,843 million grew 1% year over year as a result of higher sales from both autonomous systems and manned aircraft.
Operating income declined 16% to $259 million, whereas operating margin contracted 180 basis points (bps) to 9.1%.
Mission Systems: Segment sales increased 6% to $2,340 million driven by higher sales volume from airborne sensors and networks along with maritime/land systems and sensors programs.
Operating income rose 9% to $348 million, with operating margin expanding 40 bps to 14.8%.
Defense Systems: Sales at this segment improved 6% to $1,881 milliondue to higher sales of battle management and missile systems as well as mission readiness.
Operating income declined 3% to $196 million, with operating margin contracting 10 bps to 10.4%.
Space Systems: Space Systems’ first-quarter 2020 sales increased 8% to $1,948 million owing to higher sales from the Space program.
The segment’s operating income improved 6% to $199 million whileoperating margin contracted 20 bps to 10.2%.
Total operating costs and expenses at the end of the quarter were $7,686 million, up 6%.
Operating income during the quarter slipped 0.2% to $934 million.
Northrop Grumman’s cash and cash equivalents, as of Mar 31, 2020, were $3,278 million, up from $2,245 million, as of Dec 31, 2019.
Long-term debt (net of current portion), as of Mar 31, 2020, was $14,299 million, up from $12,770 million, as of 2019-end.
Net cash outflow from operating activities, as of Mar 31, 2020, was $993 million compared with $913 million, as of Mar 31, 2019.
Considering the global impact of the COVID-19 pandemic, Northrop Grumman has lowered its 2020 revenue and earnings guidance. The company currently expects to generate revenues in the range of $35.0-$35.4 billion, compared with its prior guidance range of $35.3-$35.8 billion during 2020. The Zacks Consensus Estimate of $35.63 billion is higher than the midpoint of the company provided guidance range.
The company’s 2020 earnings are currently expected to be in the range of $21.80-$22.20 per share, compared with the previous band of $22.75-$23.15 per share. The Zacks Consensus Estimate of $22.97 is higher than the company provided guidance range.
The company however continues to expect free cash flow of $3.15-$3.45 billion in 2020.
Northrop Grumman currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Recent Defense Releases
Teledyne Technologies Inc. TDY reported first-quarter 2020 earnings of $2.28 per share, which surpassed the Zacks Consensus Estimate of $2.10 by 8.6%.
Lockheed Martin Corp. LMT reported first-quarter 2020 earnings of $6.08 per share, which surpassed the Zacks Consensus Estimate of $5.76 by 5.5%.
Hexcel Corporation HXL reported first-quarter 2020 adjusted earnings of 64 cents per share, which missed the Zacks Consensus Estimate of 67 cents by 4.5%.
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2020?
Last year's 2019 Zacks Top 10 Stocks portfolio returned gains as high as +102.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2020 today >>
Click to get this free report
Northrop Grumman Corporation (NOC): Free Stock Analysis Report
Lockheed Martin Corporation (LMT): Free Stock Analysis Report
Hexcel Corporation (HXL): Free Stock Analysis Report
Teledyne Technologies Incorporated (TDY): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.