Northrop Grumman Stock Slips After Mixed Q3 Results, Weak FY21 Revenue Outlook

Northrop Grumman Corp NOC reported a third-quarter FY21 sales decline of 4% year-over-year to $8.72 billion, +3% on an organic basis, missing the consensus of $8.94 billion.
Sales by segments: Aeronautics Systems $2.73 billion (-6% Y/Y), Defense Systems $1.41 billion (-24% Y/Y), Mission Systems $2.44 billion (-5% Y/Y), and Space Systems $2.68 billion (+22% Y/Y).
The company specified its Q3 sales were affected tight labor market, elevated levels of employee leave, and supply chain challenges.
EPS increased to $6.63 from $5.89 in 3Q20, beating the consensus of $5.99.
Total operating income increased 6% Y/Y to $1.04 billion, and the margin expanded by 120 bps to 12%, while the segment operating margin expanded by 40 bps to 11.9%.
Northrop Grumman generated cash from operating activities year-to-date of $2.13 billion, compared to $2.7 billion a year ago, with an adjusted Free cash flow of $1.53 billion (-19% Y/Y).
The company’s backlog at the end of the quarter was at $74.8 billion. Net awards in the quarter totaled $6.9 billion, and year-to-date was at $22.3 billion.
FY21 Outlook: Northrop expects sales of ~$36 billion (prior expectation $35.8 billion to $36.2 billion), below the consensus of $36.26 billion.
It sees Transaction adjusted EPS of $25.20-$25.60 (prior $24.40 - $24.80) versus the consensus of $24.99.
It expects a Transaction-adjusted free cash flow of $3 billion— $3.3 billion, a Segment operating margin of 11.7%-11.9% (prior 11.6% — 11.8%), and an Operating margin of 16%-16.2% (prior 15.5%-15.7%).
Price Action: NOC shares are trading lower by 7.19% at $360.23 on the last check Thursday.

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