Northrop Grumman expects to hit within the low end of its forecasted range for sales and profits this year, the company announced in its third quarter earnings call Thursday morning.
The company's net earnings are still down compared to the same period last year with quarterly earnings down about 14% to $915 million and year-to-date net earnings down about 34% to $2.8 billion, according to Northrop’s financial statements.
CEO Kathy Warden and Chief Financial Officer Dave Keffer tied the less-favorable results to persistent supply-chain problems, which has been a familiar refrain among industry executives during this quarter’s earnings calls.
“I would point to our 2022 original guidance, which was our expectation with either minimal or no supply-chain disruption,” Warden said. “When we put that plan together late last year, we were not anticipating the level of supply chain disruption nor the duration of supply chain disruption that we’ve experienced throughout the year.”
Though expecting the problems to last well into or through 2023, Warden called these “temporal challenges” and said the company will drive segment margin rates higher over time.
If Northrop had not faced supply-chain problems, it would have reached the high ends of its 2022 expectation range, Warden said.
During the quarter there were several favorable announcements for the company, Warden said.
Northrop won an award from the Missile Defense Agency for the Ground-based Midcourse Defense Weapon System program. The indefinite-delivery, indefinite-quantity contract comes with a maximum amount of $3.287 billion.
The Air Force also announced Raytheon Missiles and Defense won a $985 million contract to develop and demonstrate the Hypersonic Attack Cruise Missile prototypes, which Northrop Grumman will partner on.
President Biden’s National Security Strategy released earlier this month shows continued support for nuclear modernization, Warden said, which will benefit Northrop as the prime contractor on two of the key modernization programs -- the Sentinel missile and the B-21 bomber.
Keffer touted the company’s year-to-date, book-to-bill ratio of 1.14, which Warden called “a significant improvement from where we started the year.” Northrop also has an $80 billion backlog.
Northrop bought back $1 billion in shares during the third quarter and expects to buy another $500 million this quarter.
Northrop’s space systems business saw the largest sales increase rate year-over-year for the third quarter with a gain of 18% to $3.8 billion. Space will likely continue to be the biggest growth area for Northrop, Keffer said.
The company's aeronautics systems and defense systems segments dropped about 7% and 5% respectively to $2.5 billion and $1.3 billion year-over-year. Its mission systems business grew by 1% to $2.5 billion.
Diluted earnings per share in the third quarter were down 11% to $5.89 from $6.63, the company said.