Executive Summary
In Q2 2024, Northrop Grumman Corporation delivered impressive financial results, with total revenue reaching $10.2 billion, reflecting a 7% year-over-year increase. This performance was driven by robust sales across all segments, primarily supported by demand for advanced weapon systems and sustained operational efficiency. Operating income grew by 13%, leading to a notable 19% growth in earnings per share (EPS), now at $6.36. Management highlighted confidence in future performance and increased revenue and EPS guidance for the year, indicating strong operational momentum and robust free cash flow generation, which was enhanced by a significant focus on cost management and strategic investment in capabilities.
Key Performance Indicators
Key Insights
**Revenue Performance**: Revenue of $10.2 billion, a 7% increase compared to Q2 2023. Year-to-date revenue growth stands at 8%.
**Profitability**: Net income was $940 million with a net profit margin of 9.2%. EPS growth reached 19% versus the prior year, reaffirming Northrop's ability to enhance shareholder returns.
**Balance Sheet Health**: Total assets amounted to $47.67 billion with total liabilities of $33.37 billion, yielding a debt-to-equity ratio of approximately 1.27. The curren...
Financial Highlights
Revenue Performance: Revenue of $10.2 billion, a 7% increase compared to Q2 2023. Year-to-date revenue growth stands at 8%.
Profitability: Net income was $940 million with a net profit margin of 9.2%. EPS growth reached 19% versus the prior year, reaffirming Northrop's ability to enhance shareholder returns.
Balance Sheet Health: Total assets amounted to $47.67 billion with total liabilities of $33.37 billion, yielding a debt-to-equity ratio of approximately 1.27. The current ratio stands at 1.09, indicating adequate liquidity.
Cash Flow: Generated free cash flow of $1.1 billion, marking an 80% year-over-year increase. Significant returns to shareholders through $900 million in dividends and share repurchases were highlighted.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
10.22B |
6.70% |
0.84% |
| Gross Profit |
2.19B |
7.40% |
2.72% |
| Operating Income |
1.09B |
12.72% |
1.77% |
| Net Income |
940.00M |
15.76% |
-0.42% |
| EPS |
6.37 |
19.07% |
0.47% |
Key Financial Ratios
operatingProfitMargin
10.7%
operatingCashFlowPerShare
$9.66
freeCashFlowPerShare
$7.49
dividendPayoutRatio
32.2%
Management Commentary
Demand Performance: Management noted that net awards totaled over $15 billion, contributing to a book-to-bill ratio of 1.5x. CEO Kathy Warden stated, "Our company's ability to respond to U.S. and international customer requirements with a wide range of advanced capabilities continues to drive strong growth."
Operational Efficiency: The focus on operational efficiency and cost management was reiterated in management's comments: "...our solid program performance, along with cost management discipline, led to operating income growth of 13% in the second quarter."
Future Outlook: Northrop's growth strategy is evident in their guidance, with expectations for continued solid growth influenced by robust defense spending. Warden emphasized, "We are increasing our 2024 revenue and EPS guidance based on these strong first half results."
Kathy Warden: "The breadth and depth of our portfolio is an important differentiator, particularly when coupled with the effectiveness of our strategy in aligning our resources to anticipate and deliver on our customers' needs."
â Kathy Warden
Dave Keffer: "We expect a gradual ramp in our quarterly sales profile with Q3 sales projected to be roughly in line with Q2."
â Dave Keffer
Forward Guidance
Management has increased their revenue and EPS guidance for 2024, now projecting total revenues between $41 billion to $41.4 billion, indicating a compelling outlook that reflects confidence in continued demand from U.S. and international markets. They expect organic revenue growth of approximately 5% annually, supported by their diversified capabilities across defense systems. Increased capital expenditures targeting $1.8 billion, or 4.5% of revenue, signal commitment to future growth. Key factors for monitoring include ongoing results in defense contracting and international sales pipelines, particularly amid the changing budgetary landscape.