Northrop Grumman Stock Jumps as Earnings Crush Estimates



Northrop Grumman declares 3Q16 earnings

Leading defense contractor (PPA) Northrop Grumman (NOC) declared its 3Q16 earnings on October 26, 2016. The company’s earnings per share (or EPS) rose 22% to $3.35 due to the one-time benefit of a favorable tax settlement and a 4% lower share count.

Excluding these benefits, NOC’s adjusted EPS rose 14.6% to $3.15 compared to estimates of $2.80. The company’s earnings release resulted in a rise of 3.9%, with its stock closing at $228.05 on the day.

Among Northrop’s peers, Lockheed Martin (LMT) and General Dynamics (GD) declared their 3Q16 earnings on October 25 and 26, respectively. Raytheon (RTN) is scheduled to release its 3Q16 earnings on October 27.

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Sales and cash flow

Sales in the quarter rose 3% year-over-year (or YoY) to $6.2 billion, led by a 9% rise in sales in Northrop’s Aerospace segment. In the segment, volumes rose for programs such as the F-35, Global Hawk, and Triton programs. The segment’s operating margins, however, rose only 1%, as they were affected by product mix.

Operating cash flow in the quarter rose $180 million YoY to $700 million. Free cash flow, which is determined by deducting capital expenditure from operating cash flow, was $601 million.

Management’s comments

Wes Bush, chair, CEO, and president of Northrop Grumman, offered the following commentary on the company’s 3Q16 performance: “Our third quarter results demonstrate that we continue to build a strong foundation for profitable growth over the long term. Congratulations to our entire team for another solid quarter.”


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