Insider Brief
- Northrop Grumman’s Q4 sales remained flat at $10.69 billion, missing estimates, as space revenue declined 13% due to restricted space programs and the NGI wind-down.
- Despite weak revenue growth, the company improved profitability, with operating income rebounding to $1.19 billion and operating margins rising to 10.2%.
- For 2025, Northrop expects up to $42.5 billion in sales, with space revenue projected at $11 billion, while shares fell 1.43% after the earnings report.
Northrop Grumman’s space business declined in the fourth quarter as overall sales remained flat, while stronger margins and cash flow bolstered the company’s financials, according to the company’s Q4 2024 and end-of-year report.
The aerospace and defense contractor reported $2.71 billion in fourth-quarter revenue for its Space Systems unit, a 13% year-over-year decline. The drop was tied to a $231 million reduction from restricted space programs and the wind-down of the Next Generation Interceptor (NGI) program, a missile defense initiative. The weakness in space offset growth in the company’s aeronautics and defense businesses.
Overall, Northrop reported fourth-quarter sales of $10.69 billion, missing Wall Street estimates of $11.01 billion. Adjusted earnings per share were $6.39, slightly above the consensus of $6.35.
Space is a growing focus for Northrop, which builds satellites, launch vehicles, and missile defense systems. Its space portfolio includes contracts with NASA, the U.S. Space Force, and commercial satellite operators. The fourth-quarter decline follows years of expansion in the segment, which has been a key contributor to Northrop’s backlog.
The company ended the quarter with a $91.5 billion backlog, reflecting new contract awards.
“Our team had another outstanding year equipping the U.S. and our allies with the advanced technologies they need to lead globally and maintain peace through strength,” said Kathy Warden, chair, chief executive officer and president. “Our financial results and new record backlog reflect the relevance of our products and the importance of our work.”
Profitability and Cash Flow Improve
Despite weak top-line growth, Northrop improved its profitability. Operating income for the quarter was $1.19 billion, rebounding from a $383 million loss in the same period last year. The company’s overall operating margin expanded to 10.2%, compared to a negative 3.7% a year ago.
The company also reported stronger cash flow. Fourth-quarter operating cash flow rose 6%, while free cash flow increased 8%. For the full year, operating cash flow grew 13%, with free cash flow up 25%, aided by lower tax payments and higher earnings.
Warden emphasized the company’s long-term financial strength.
“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,” she said. “Northrop Grumman remains committed to leading the way in technology innovation for national security.”
2025 Outlook: Modest Growth Ahead
For 2025, Northrop expects total sales between $42 billion and $42.5 billion, slightly below analyst expectations of $42.8 billion. Adjusted earnings per share are projected to be between $27.85 and $28.25.
The company forecasts space sales of about $11 billion for the year, indicating a recovery but still lagging behind its other business segments. Aeronautics Systems, which includes military aircraft, is expected to generate around $13 billion in sales, while Defense Systems and Mission Systems are projected at roughly $8 billion and $12 billion, respectively.
Northrop’s stock declined 1.43% to $474.63 in afternoon trading Thursday following the earnings release.
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