Disappointing Quarter Results Lead to 4.5% Pre-Market Drop
Northrop Grumman experienced a 4.5% decline in premarket trading on Thursday following the release of its latest quarterly results. The company failed to meet earnings expectations primarily due to a B-21 charge of $7.68 per share. In the fourth quarter, Northrop Grumman reported an EPS of ($1.45), falling short of the analyst estimate of $5.81. However, the revenue for the quarter came in at $10.6 billion, reflecting a 6% year-on-year increase and surpassing the consensus estimate of $10.43 billion.
Record Backlog and Positive Outlook
Despite the disappointing earnings, Northrop Grumman announced that it achieved a record backlog of over $84 billion, driven by a book-to-bill ratio of 1.14. Kathy Warden, the CEO and president of NOC, expressed satisfaction over the company’s financial performance, stating, “We generated free cash flow at the high end of our guidance range, significantly exceeded our sales guidance and beat EPS consensus absent the B-21 charge we identified as a possibility this time last year.” Furthermore, Northrop Grumman anticipates sustained global demand for its products and forecasts the FY24 revenue to range between $40.8 billion and $41.2 billion, slightly below the consensus estimate of $41.15 billion. The company also reaffirmed its 2024 and 2025 free cash flow projections and expects solid growth in 2026.
Jefferies Comments on the Results
Analysts at Jefferies, who hold a Hold rating on Northrop Grumman stock with a $510 price target, provided their analysis of the results. They noted that NOC recognized a $1.56 billion charge for B-21 as the company received an award for the first LRIP (Low-Rate Initial Production) lot. The analysts also revealed that Aero sales were guided to be in the low $11 billion range, with a 4% year-on-year increase and mid-9% margins, differing slightly from their estimate of $10.9 billion and 10.0% margins. Additionally, defense is expected to reach approximately $6 billion (a 2% year-on-year increase) with low-12% margins (+10 bps), close to the analysts’ estimation of $5.9 billion and 12.1% margins. Lastly, MS (Mission Systems) is projected to achieve low-to-mid-$11 billion in sales, a 5% year-on-year growth, and margins of around 15%, aligning with the analysts’ estimates of $11.4 billion and 15.1% margins.