Executive Summary
Northrop Grumman Corporation (NOC) delivered strong operational performance in Q3 2024, with revenues reaching $9.996 billion, marking a 6% increase year-to-date. The company's record backlog of $85 billion supports its growth trajectory, reinforcing management's confidence in achieving full-year guidance of 5% growth. Notably, net income surged to $1.026 billion, reflecting a 13% year-over-year increase in earnings per share (EPS) to $7.00. Management emphasized ongoing productivity improvements, resulting in the highest segment operating margin in over two years at 11.5%. The results indicate better-than-expected performance across its segments, particularly in Aeronautics and Mission Systems, underpinned by robust demand driven by increasing geopolitical tensions and growing defense budgets. Forward guidance suggests an optimistic outlook for upcoming quarters, with a focus on capital deployment strategies aimed at returning approximately 100% of free cash flow to shareholders.
Key Performance Indicators
Key Insights
1. Total Revenue: $9.996 billion, up 6% YoY.
2. Gross Profit: $2.106 billion, gross margin at 21.1%.
3. Operating Income: $1.12 billion, operating margin at 11.2%.
4. Net Income: $1.026 billion, net margin at 10.3%.
5. EPS (diluted): $7.00, a 13% increase from Q3 2023.
6. Free Cash Flow: $730 million, consistent with expectations.
7. Backlog: $85 billion, providing strong visibility into future growth.
8. Debt to Equity Ratio: 1.12, demonstrating a balanced financial leveraging....
Financial Highlights
1. Total Revenue: $9.996 billion, up 6% YoY.
2. Gross Profit: $2.106 billion, gross margin at 21.1%.
3. Operating Income: $1.12 billion, operating margin at 11.2%.
4. Net Income: $1.026 billion, net margin at 10.3%.
5. EPS (diluted): $7.00, a 13% increase from Q3 2023.
6. Free Cash Flow: $730 million, consistent with expectations.
7. Backlog: $85 billion, providing strong visibility into future growth.
8. Debt to Equity Ratio: 1.12, demonstrating a balanced financial leveraging.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
10.00B |
2.26% |
-2.17% |
| Gross Profit |
2.11B |
3.18% |
-3.88% |
| Operating Income |
1.12B |
10.24% |
2.75% |
| Net Income |
1.03B |
9.50% |
9.15% |
| EPS |
7.02 |
13.23% |
10.20% |
Key Financial Ratios
operatingProfitMargin
11.2%
operatingCashFlowPerShare
$7.46
freeCashFlowPerShare
$4.99
dividendPayoutRatio
29.3%
Management Commentary
1. Strong Operational Performance: Kathy Warden, CEO, stated, 'We delivered strong operating performance again in the third quarter, building on the momentum we achieved through the first half of the year... Our backlog is now $85 billion, supporting our confidence in future growth.'
2. Market Demand: Warden emphasized the growing demand for advanced capabilities, noting, 'Global events continue to highlight the need for advanced capabilities to defend and deter against increasingly complex threats.'
3. Guidance Updates: Management increased EPS guidance by $0.75, signaling confidence, as stated by Warden: 'Based on our solid year-to-date results and full-year outlook, we are increasing our EPS guidance range.'
Kathy Warden: 'This is our third quarter in a row of 10% or better margins at [Aeronautics].'
â Kathy Warden
Dave Keffer: 'Our international awards were particularly strong in Q3 at $2.7 billion, increasing our international backlog to almost $8 billion.'
â Dave Keffer
Forward Guidance
Looking ahead to 2025, Northrop Grumman projects sales growth between 3% and 4%, emphasizing strong performance across three of its four business segments. A shift towards procurement of international sales is expected to enhance profitability, with management indicating that free cash flow is forecasted to grow more than 20% year-over-year. They plan to return nearly 100% of free cash flow to shareholders, reflecting a sustainable commitment to shareholder value.