Northrop Grumman on Wednesday reported a strong second quarter on higher earnings and sales, while strong order flow also drove a substantial increase in the company’s backlog.
Net income increased 9% to $861 million, $5.06 earnings per share (EPS), from $789 million ($4.50 EPS) a year ago, beating consensus estimates by $0.38 per share. Sales increased 19% to $8.5 billion from $7.1 billion.
The primary driver behind the higher sales was the contribution from the former Orbital ATK, which Northrop Grumman acquired in June 2018. Organic sales, were up 4%, driven by infrared countermeasures, airborne radar, classified programs, space payloads and mission programs at the Mission Systems segment and F-35 production and a civil space program at the Aerospace Systems segment.
The Orbital ATK acquisition made Northrop Grumman part owner of Consolidated Nuclear Security, the National Nuclear Security Administration’s management and operations contractor for the Y-12 National Security Complex in Tennessee and the Pantex Plant in Texas. If the NNSA exercises all options, the Bechtel National-led could stay on the job through October 2024. The 10-year award’s average annual value is roughly $2 billion.
Northrop Grumman has a $330 million contract to design the U.S. Air Force’s next-generation Ground-Based Strategic Deterrent (GBSD) intercontinental ballistic missile. Boeing, which had a competing design contract, said this week it would not bid on a contract to build the missiles.
Northrop is also building the Air Force’s next strategic bomber, the B-21 Raider.
The company’s classified work, as a percent of revenue, is growing across its businesses, Kathy Warden, Northrop Grumman’s president and CEO, said on a call with analysts.
Overall, orders in the second quartered totaled $13.5 billion, fueling an increase in backlog to $63 billion from $57.3 billion at the end of the first quarter.
Segment operating margins rose 70 basis points to 11.6 percent.
Based on performance so far this year combined with the outlook for the rest of 2019, Northrop Grumman boosted its adjusted earnings guidance for the year to between $19.30 and $19.55 per share from the prior outlook of between $18.90 to $19.30 per share. The forecast for sales remains around $34 billion.
