Executive Summary
Northrop Grumman Corporation's performance in Q4 2023 underscored a resilient operational capacity amidst ongoing global uncertainties. With revenue hitting $10.6 billion—a 6% increase year-over-year—management continues to emphasize a robust backlog exceeding $84 billion, representing a healthy business foundation. However, the quarter's results were marred by a significant pre-tax charge associated with the B-21 program, reflecting pressures from macroeconomic conditions. Despite the charge leading to a net loss of $535 million, CEO Kathy Warden reiterated confidence in the company's strategy and cash flow outlook, affirming projected double-digit growth in free cash flow over the upcoming years. The ongoing global security environment remains favorable for defense spending, positioning Northrop Grumman well for potential growth in the defense sector.
Key Performance Indicators
QoQ: -76.24% | YoY:-73.41%
QoQ: -138.68% | YoY:-115.28%
QoQ: -157.10% | YoY:-125.72%
QoQ: -157.10% | YoY:-126.07%
Key Insights
Revenue: $10.6 billion (+6% YoY)
Net Income: -$535 million (-126% YoY)
EPS: -$3.54
Free Cash Flow: $2.1 billion
Backlog: Exceeded $84 billion
Operating Margin: -3.68%
Gross Margin: 4.56%
Total Liabilities: $31.75 billion
Total Equity: $14.8 billion
Current Ratio: 1.15
Debt-to-Equity Ratio: 1.12
Book-to-Bill Ratio: 1.14.
Management explained that revenue growth came from a diverse demand across segments, including Aeronautics and Space....
Financial Highlights
Revenue: $10.6 billion (+6% YoY)
Net Income: -$535 million (-126% YoY)
EPS: -$3.54
Free Cash Flow: $2.1 billion
Backlog: Exceeded $84 billion
Operating Margin: -3.68%
Gross Margin: 4.56%
Total Liabilities: $31.75 billion
Total Equity: $14.8 billion
Current Ratio: 1.15
Debt-to-Equity Ratio: 1.12
Book-to-Bill Ratio: 1.14.
Management explained that revenue growth came from a diverse demand across segments, including Aeronautics and Space.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
10.64B |
6.03% |
8.83% |
| Gross Profit |
485.00M |
-73.41% |
-76.24% |
| Operating Income |
-393.00M |
-115.28% |
-138.68% |
| Net Income |
-535.00M |
-125.72% |
-157.10% |
| EPS |
-3.54 |
-126.07% |
-157.10% |
Key Financial Ratios
operatingProfitMargin
-3.69%
operatingCashFlowPerShare
$16.08
freeCashFlowPerShare
$10.77
dividendPayoutRatio
-52.7%
priceEarningsRatio
-33.05
Management Commentary
Management Insights on Strategic Directions:
- Kathy Warden, CEO: "Our strategies have positioned us well to compete and win in this growing market which translated into accelerating top-line growth for Northrop Grumman."
- Dave Keffer, CFO: "We generated free cash flow at the high end of our guidance range, and we comfortably exceeded our sales and EPS guidance range, absent the B-21 charge."
- On B-21 Program: Warden acknowledged, "The charge is largely driven by a change in our assumptions regarding funding to mitigate the impact of macroeconomic disruptions... We have absorbed this effect and have not changed our outlook for free cash flow growth."
- Future Outlook: "We expect another solid year of bookings with a book-to-bill around one times. Our guidance reflects growth in sales and segment margin between 4% and 5%, absent the B-21 charge."
"Our strategies have positioned us well to compete and win in this growing market, which translated into accelerating top-line growth for Northrop Grumman."
— Kathy Warden, CEO
"The underlying performance of our company is strong. We generated free cash flow at the high end of our guidance range, and we comfortably exceeded our sales and EPS guidance range."
— Dave Keffer, CFO
Forward Guidance
For 2024, Northrop Grumman anticipates continued growth in its organic sales by 4-5% and expects EPS between $24.45 and $24.85, reflecting 6% adjusted growth. The management guidance hinges significantly on the performance improvements expected from the B-21 program as production ramps up and favorable macroeconomic conditions stabilize. Northrop Grumman also plans to invest over $2.9 billion in R&D and capital expenditures, which corresponds to 7.5% of sales, signifying its intent to bolster innovation and capacity. Importantly, the company reaffirmed its commitment to a long-term free cash flow growth target of 15% CAGR, reinforcing confidence in its strategic investments and market positioning.