Northrop Grumman’s Guidance Takes Flight on Better Sales, Margins



Northrop Grumman on Lot 9 and Lot 10 of F-35

Lockheed Martin (LMT) has been in talks with the Pentagon for several months to finalize negotiations for the ninth and tenth batches of F-35 fighter jets for a total value of ~$16 billion. Negotiations have been delayed due to the complexities involved in estimating the cost of future jets.

However, according to Northrop Grumman (NOC), it has completed its negotiations for Lot 9 and Lot 10 F-35s with Lockheed. The company stated that it’s typical for a prime contractor to lock down the supply chain as it negotiates with a customer.

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Northrop Grumman updates its 2016 guidance

Because Northrop’s 3Q16 performance was better than expected, it has raised its sales and earnings per share (or EPS) guidance for the entire year.

Compared to the previous range of $23.5 billion–$24 billion, the company now expects sales in the range of $23.9 billion–$24.1 billion. Its forecast for diluted EPS has risen from the range of $10.75–$11.00 to the range of $11.55–$11.75. The upgrade was mainly on account of better-than-expected operating margins, a lower tax rate, and an improved sales forecast. The company has maintained its free cash flow guidance at the previous range of $1.5 billion–$1.8 billion.

Share repurchases

In 3Q16, Northrop repurchased 2.2 million shares for a total of $470 million. This took the company’s total 2016 repurchase tally to 5.6 million shares for a total value of $1.2 billion.


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