Fueled by its Defense Systems and Mission Systems segments, Northrop Grumman, which is developing the Sentinel intercontinental ballistic missile, Tuesday reported strong third quarter results wherein earnings rose
Net earnings for the third quarter, ended Sept. 30 and listed in the company’s 10-Q form, were $1.1 billion, up from $1.026 year-over-year.
Net income rose 7% to $1.1 billion, $7.67 earnings per share (EPS), from just over $1 billion ($7 EPS) a year ago, crushing consensus estimates of $6.41 per share. Most of the improvement came from better segment performance.
Sales increased 4% to $10.4 billion from $10 billion a year ago. Adjusting for the sale in May of its training business, organic revenue was up 5%. International sales increased 32%.
The bottom-line drivers were the Defense Systems and Mission Systems segments, which benefited from higher sales, program efficiencies, and a shift toward work on fixed-price contracts in the Defense segment. Both segments posted double-digit sales increases, including on the Sentinel intercontinental ballistic missile.
Flight-testing on the Air Force’s B-21 bomber program continues, as do ground tests with multiple other aircraft as they prepare to join the flight program, Kathy Warden, chairwoman, president, and CEO of Northrop Grumman, said on the call Tuesday.
Northrop Grumman and the Air Force continue discussions on increasing production of the B-21, which will require more investment by the company and the “opportunity to earn improved returns,” Warden said. These discussions have been “held up a bit” due to the ongoing “government shutdown and the availability of resources to continue those discussions during this time,” she said later in the call.
The change in presidential administrations earlier this year coupled with the ongoing government shutdown has delayed timing on some awards and programs, Warden said. So far, the shutdown has been largely immaterial to the company but if it persists another month or longer, more “delays in getting funding on contract or even delays in receiving payment before year end” could dampen cash flow, she said.
Given the award delays, Northrop Grumman reduced its sales guidance to between $41.7 billion and $41.9 billion versus the prior outlook of $42.1 billion and $42.3 billion. The company raised its adjusted earnings forecast by 65 cents per share to between $25.65 and $26.05 EPS on lower than expected corporate expenses, and revised expectations for pension income and the tax rate.
Exchange Monitor affiliate Defense Daily first published a version of this article.