Company Overview - Northrop Grumman Corporation, originally formed in 1939 as Northrop Aircraft Incorporated and reincorporated in 1985, is a global security company that supplies a wide range of products including space systems, military aircraft, missile defense, advanced weapons, and cyber technologies [11]. Investment Ratings - Northrop Grumman is currently rated as 3 (Hold) on the Zacks Rank, with a VGM Score of A, indicating a solid position in the market [11]. Growth Potential - The company is considered a top pick for growth investors, with a Growth Style Score of A, forecasting a year-over-year earnings growth of 6.9% for the current fiscal year [12]. - Recent analyst activity shows two analysts have revised their earnings estimates higher in the last 60 days for fiscal 2025, with the Zacks Consensus Estimate increasing by $0.09 to $27.88 per share [12]. - Northrop Grumman has an average earnings surprise of 8.1%, further indicating its potential for growth [12].

Core Insights - Northrop Grumman Corporation is one of the largest aerospace and defense technology companies globally, serving clients worldwide, including the US Department of Defense [1] Company Overview - Established in 1939, Northrop Grumman has a long history in the aerospace and defense sector [1] - The company focuses on long-term and medium-term value investments, emphasizing firms with strong fundamentals [1] Investment Focus - The investment strategy is sector-agnostic, targeting companies with good fundamentals for long-term growth [1]

Core Viewpoint - Truist Securities analyst Michael Ciarmoli maintains a Buy rating on Northrop Grumman Corp (NOC) with a price target of $545, highlighting expectations for growth in the Space Systems segment and overall margin improvement in 2025 [1][4]. Group 1: Financial Performance - Northrop Grumman reported fourth-quarter sales of $10.686 billion, remaining flat year over year, with an MTM-adjusted earnings per share of $6.39 [1]. - Management anticipates revenues to remain roughly unchanged in Q1 2025, with growth expected to return in the second half of 2025, particularly in the Space Systems segment, which is projected to achieve margins of approximately 10% for the year [2][4]. - Overall consolidated segment margins are expected to increase throughout 2025, with a forecasted margin expansion of about 10 basis points [3]. Group 2: Strategic Initiatives - The restructuring plan involves shifting the sustainment business from Defense Systems to Aeronautics Systems, which is expected to enhance margins and create synergies between the two segments [3]. - International expansion is gaining momentum, with Northrop Grumman forecasting double-digit revenue growth in foreign markets for 2025, outpacing domestic growth [4]. Group 3: Product Development - The B-21 program, which represents about 8% of 2025 sales, is expected to maintain strong political support, while discussions are ongoing regarding increasing the total order volume for the aircraft [5][8]. - The Sentinel program is anticipated to show steady growth in 2025, although it is expected to contribute less than 10% of total revenue [5][8]. Group 4: Market Outlook - Despite limited margin expansion in 2025, analysts believe Northrop Grumman is well-positioned for significant margin growth in 2026, with international sales potentially offering additional upside in 2026-2027 [7]. - The price forecast is based on a 20.5x multiple on the 2026 free cash flow estimate of approximately $3.45 billion [8].

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Financial Performance - Total sales for the year ended December 31, 2024, were $41.033 billion, with 51% from cost-type contracts and 49% from fixed-price contracts[50]. - Total backlog as of December 31, 2024, was $91.5 billion, up from $84.2 billion at the end of 2023, representing an increase of approximately 15.5%[31]. - The company has $16.3 billion in long-term debt, primarily consisting of fixed-rate debt, with a fair value of approximately $15.3 billion[284]. Employee Metrics - The company hired approximately 7,400 new employees in 2024, bringing the total employee count to approximately 97,000 as of December 31, 2024[34]. - Approximately 4,100 employees are covered by 15 collective agreements, with five renewals negotiated in 2024 and seven expected in 2025[43]. - In 2024, 80% of employees participated in the annual Employee Experience Survey, indicating strong engagement and feedback mechanisms[35]. Risk Management - Foreign currency forward contracts with a notional amount of $399 million were outstanding as of December 31, 2024, to manage exchange rate risks[285]. - The company faced challenges with access to certain raw materials due to macroeconomic factors, but these have not materially impacted contract performance[33]. - The company’s fixed-price contracts may carry higher profit margins but also involve more financial risk associated with unanticipated cost growth[48]. Investment and Market Exposure - At December 31, 2024, the company had a portfolio of marketable securities valued at $347 million, exposing it to market volatilities[283].

Core Insights - Northrop Grumman Corporation (NOC) reported strong fourth-quarter 2024 adjusted earnings of $6.39 per share, exceeding the Zacks Consensus Estimate of $6.27 by 1.9% and significantly improving from a loss of $1.45 per share in the same quarter last year [1][2] - The company achieved total sales of $10.69 billion in the fourth quarter, which was below the Zacks Consensus Estimate of $11.03 billion by 3.1%, but showed a slight year-over-year increase of 0.5% from $10.64 billion [3] - For the full year 2024, NOC reported adjusted earnings of $26.08 per share, surpassing the Zacks Consensus Estimate of $25.96 by 0.5% and improving from $15.61 in 2023 [2] Financial Performance - NOC's GAAP earnings for the fourth quarter were $8.66 per share, a significant recovery from a GAAP loss of $3.54 in the fourth quarter of 2023 [2] - The company's total sales for 2024 reached $41.03 billion, missing the Zacks Consensus Estimate of $41.37 billion, but representing a 4% increase from $39.29 billion in 2023 [4] - Operating income for the fourth quarter totaled $1.19 billion, a notable improvement from $0.38 million in the prior-year quarter, driven by higher income in Aeronautics Systems and Defense Systems [10] Segment Performance - Aeronautics Systems segment sales increased by 11% year-over-year to $3.22 billion, with operating income rising to $292 million from a loss of $1,271 million in the fourth quarter of 2023 [6] - Mission Systems segment sales grew by 3% to $3.14 billion, with operating income increasing by 2% to $469 million, although the operating margin contracted by 20 basis points to 14.9% [7] - Defense Systems segment sales rose by 5% to $2.33 billion, with operating income improving by 13% to $252 million, despite a deterioration in operating margin by 80 basis points to 10.8% [8] - Space Systems segment sales declined by 13% to $2.71 billion, with operating income decreasing by 5% to $275 million, although the operating margin expanded by 70 basis points to 10.1% [9] Backlog and Financial Condition - The total backlog for NOC at the end of the fourth quarter was $91.47 billion, an increase from $84.80 billion at the end of the third quarter [5] - As of December 31, 2024, the company's cash and cash equivalents totaled $4.35 billion, up from $3.11 billion a year earlier, while long-term debt increased to $14.69 billion from $13.79 billion [11] 2025 Guidance - NOC provided guidance for 2025, expecting revenues in the range of $42.00-$42.50 billion, with the consensus estimate at $42.86 billion [12] - The company anticipates adjusted earnings between $27.85-$28.25 per share, aligning with the lower end of the consensus estimate of $27.85 per share [12] - NOC projects adjusted free cash flow to be in the range of $2.85-$3.25 billion for 2025 [12]

Core Insights - Northrop Grumman reported $10.69 billion in revenue for Q4 2024, a year-over-year increase of 0.5%, with an EPS of $6.39 compared to $6.27 a year ago [1] - The revenue fell short of the Zacks Consensus Estimate of $11.03 billion by -3.09%, while the EPS exceeded the consensus estimate of $6.27 by +1.91% [1] Financial Performance Metrics - Mission Systems sales were $3.14 billion, below the average estimate of $3.24 billion, reflecting a year-over-year increase of +2.6% [4] - Aeronautics Systems sales reached $3.22 billion, slightly above the average estimate of $3.20 billion, with a year-over-year increase of +10.7% [4] - Space Systems sales were $2.71 billion, below the average estimate of $2.74 billion, showing a significant year-over-year decline of -24.8% [4] - Defense Systems sales totaled $2.33 billion, below the average estimate of $2.58 billion, but represented a year-over-year increase of +41.8% [4] - Intersegment eliminations reported a revenue of -$721 million, slightly better than the average estimate of -$728.36 million, with a year-over-year change of +23.9% [4] Operating Income Analysis - Operating income for Defense Systems was $252 million, below the average estimate of $264.46 million [4] - Mission Systems operating income was $469 million, exceeding the average estimate of $457.72 million [4] - Space Systems operating income was $275 million, slightly below the average estimate of $281.02 million [4] - Aeronautics Systems operating income was $292 million, below the average estimate of $312.28 million [4] - Unallocated corporate expenses were reported at -$112 million, worse than the average estimate of -$93.95 million [4] - FAS/CAS operating adjustment showed a positive $8 million, compared to the average estimate of -$5.89 million [4] Stock Performance - Northrop Grumman shares returned +2.6% over the past month, outperforming the Zacks S&P 500 composite's +1.2% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market [3]

Group 1: Earnings Performance - Northrop Grumman reported quarterly earnings of $6.39 per share, exceeding the Zacks Consensus Estimate of $6.27 per share, and showing an increase from $6.27 per share a year ago, representing an earnings surprise of 1.91% [1] - The company has surpassed consensus EPS estimates in all four of the last quarters [2] - The revenue for the quarter ended December 2024 was $10.69 billion, which missed the Zacks Consensus Estimate by 3.09%, but showed a slight increase from $10.64 billion year-over-year [2] Group 2: Stock Performance and Outlook - Northrop Grumman shares have increased by approximately 2.6% since the beginning of the year, compared to the S&P 500's gain of 2.7% [3] - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] - The current consensus EPS estimate for the next quarter is $6.50 on revenues of $10.28 billion, and for the current fiscal year, it is $27.85 on revenues of $42.86 billion [7] Group 3: Industry Context - The Aerospace - Defense industry, to which Northrop Grumman belongs, is currently ranked in the bottom 40% of over 250 Zacks industries, indicating potential challenges for stock performance [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5] - The current estimate revisions trend for Northrop Grumman is mixed, resulting in a Zacks Rank 3 (Hold), suggesting the stock is expected to perform in line with the market in the near future [6]

Fourth Quarter 2024 Conference Call Kathy Warden Chair, Chief Executive Officer and President Ken Crews Corporate Vice President and Chief Financial Officer January 30, 2025 Forward-Looking Statements This presentation and the information we are incorporating by reference, and statements to be made on the earnings conference call, contain or may contain statements that constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "will," "e ...