Northrop Grumman's Q4 Sales Stagnate, Space Systems Struggles, But Margins And EPS Improve

Northrop Grumman Corp NOC reported fourth-quarter sales that were flat year over year at $10.686 billion, missing the consensus of $11.01 billion.

MTM-adjusted earnings per share were $6.39, beating the consensus of $6.35.

Sales by segments: Aeronautics Systems $3.22 billion (+11% Y/Y), Defense Systems $2.33 billion (+5% Y/Y), Mission Systems $3.144 billion (+3% Y/Y), and Space Systems $2.71 billion (-13% Y/Y).

The decline in Space Systems sales was driven by a $231 million decrease due to restricted space and NGI program wind-downs.

Segment operating income for the quarter was $1.193 billion, recovering from an operating loss of $383 million a year ago. The margin improved to 11.2%, up from (3.6%) a year ago.

Total operating margin expanded to 10.2%, compared to (3.7%) in the fourth quarter of 2023. NOC's fourth-quarter net awards totaled $17.3 billion, and its backlog reached $91.5 billion.

Operating cash flow rose by 6%, and free cash flow grew by 8%, driven by improved working capital. Full-year 2024 operating cash flow increased by 13%, with free cash flow up by 25%, supported by lower tax payments and higher earnings.

"Our financial results and new record backlog reflect the relevance of our products and the importance of our work. Over the last five years our sales have grown 30% organically and our free cash flow expanded 25% in 2024. Our guidance anticipates continued top line growth, margin expansion, and double digit cash flow growth," said Kathy Warden, chair, chief executive officer, and president.

Fiscal 2025 Outlook: Northrop Grumman now expects sales of $42 billion-$42.5 billion versus the consensus of $42.80 billion.

The company sees MTM-adjusted EPS of $27.85 — $28.25 versus consensus of $28.05.

It sees Segment operating income of $4.65 billion—$4.800 billion and adjusted free cash flow of $2.85 billion—$3.25 billion for 2025.

For 2025, Aeronautics Systems expects sales in the low $13 billion range, Defense Systems projects sales in the low $8 billion range, Mission Systems anticipates ~$12 billion in sales, and Space Systems forecasts ~$11 billion in sales. Intersegment eliminations are estimated at ~($2.1 billion).

Price Action: NOC shares traded lower by 1.43% at $474.63 at the last check on Thursday.