Executive Summary
Northrop Grumman Corporation (NOC) reported a robust performance in the first quarter of 2024, achieving a 9% increase in sales year-over-year alongside a 15% increase in diluted EPS, reaching $6.32. The growth was underpinned by broad-based advancements across all four business sectors, fueled by heightened global demand for defense capabilities. The company reaffirmed its full-year guidance, reflecting confidence in its operational strategy and ongoing investments aligned with macroeconomic conditions.
In management commentary, Kathy Warden, Chair, CEO, and President of Northrop Grumman, emphasized the company's strategic direction focused on technology leadership and efficient performance. The successful negotiations surrounding the U.S. defense budget and ongoing international contracts, particularly in missile defense and microelectronics, position Northrop Grumman favorably for sustained growth in 2024 and beyond.
Key Performance Indicators
QoQ: 372.52% | YoY:13.09%
QoQ: 276.45% | YoY:12.11%
QoQ: 279.10% | YoY:14.86%
Key Insights
**Revenue Performance**: Q1 2024 revenue climbed to $10.1 billion, a solid increase from $9.3 billion in Q1 2023, resulting in an 8.95% year-over-year growth rate.
**Profitability**: The operating income rose 10% to $1.07 billion, with operating margin improving to 10.9%. Net income surged to $944 million, reflecting a substantial year-on-year increase of 12.11%. The company's gross profit margin stood at 21.1%, reinforcing profitability despite cost pressures.
**Cash Flow and Capital Ex...
Financial Highlights
Revenue Performance: Q1 2024 revenue climbed to $10.1 billion, a solid increase from $9.3 billion in Q1 2023, resulting in an 8.95% year-over-year growth rate.
Profitability: The operating income rose 10% to $1.07 billion, with operating margin improving to 10.9%. Net income surged to $944 million, reflecting a substantial year-on-year increase of 12.11%. The company's gross profit margin stood at 21.1%, reinforcing profitability despite cost pressures.
Cash Flow and Capital Expenditure: Free cash flow was a net outflow of approximately $1 billion, which is expected to normalize in Q2 due to seasonal patterns. Capital expenditures for 2024 are projected to remain elevated at $1.8 billion, supporting both current operations and future growth initiatives.
Balance Sheet Health: Cash reserves remain strong at $3.06 billion. Total debt stands at $18.15 billion, leading to a debt ratio of approximately 38%, manageable in relation to total capitalization. The company’s interest coverage ratio of 7.34 highlights solid coverage of debt service obligations.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
10.13B |
8.95% |
-4.75% |
| Gross Profit |
2.13B |
7.46% |
339.79% |
| Operating Income |
1.07B |
13.09% |
372.52% |
| Net Income |
944.00M |
12.11% |
276.45% |
| EPS |
6.34 |
14.86% |
279.10% |
Key Financial Ratios
operatingProfitMargin
10.6%
operatingCashFlowPerShare
$-4.74
freeCashFlowPerShare
$-6.55
Management Commentary
Growth Strategy: "The team's relentless execution of our strategy has positioned us for continued success. Global demand for our capabilities led to an exceptional 9% year-over-year increase in Q1 sales." - Kathy Warden.
Future Outlook: "We continue to expect substantial support from the fiscal year 2024 defense budget, which includes a 6% growth in investment accounts over 2023, reflecting the strong backing for our key programs." - Kathy Warden.
International Opportunities: "We see numerous new international opportunities...Poland signed a letter of acceptance for additional implementation of our IBCS product line...representing a potential $10 billion pipeline." - Kathy Warden.
"Global demand for our products continues to be robust, fueled by rising defense budgets and our market position."
— Kathy Warden
"We are investing in capabilities that meet our customers' needs to address rapidly evolving threats."
— Kathy Warden
Forward Guidance
Management has reaffirmed guidance for 2024, suggesting second-quarter sales will align closely with Q1 results, reflecting a robust demand backdrop despite potential headwinds impacting growth dynamics. The company anticipates a gradual ramp-up in sales throughout the year, with an increased book-to-bill ratio anticipated at Aeronautics and Defense Systems, suggesting healthy business demand despite a lower-than-1 book-to-bill ratio for the Space sector. Investors should closely monitor developments surrounding defense budgets and international contracts as key indicators of future performance.