The continuing war in Ukraine and increasing geopolitical tensions elsewhere has led to increased sales for Northrop Grumman, which reported a record backlog of $84 billion during its third-quarter earnings call today.
Northrop raised its 2023 sales guidance by $400 million to about $39 billion, due largely to growing international demand for products including the Advanced Anti-Radiation Guided Missile-Extended Range, CEO Kathy Warden said.
Sales rose in all four segments -- aeronautics, defense, mission and space systems -- in both the third quarter and year-to-date compared to the same periods last year. It grew 9% in Q3 to $9.8 billion and 8% to $28.7 billion for the nine-month period.
The space segment saw the largest increase of 11% for the quarter to $3.5 million and 15% year-to-date to $10.3 million.
“Our success in this area highlights our ability to compete and win in highly competitive and dynamic new markets within the space domain,” Warden said.
The company’s largest contract awards for Q3 include $1.3 billion for the E-2 Hawkeye program, $712 million for the Space Development Agency’s Tranche 2 Transport Layer of satellites and more than $500 million for the Guided Multiple Launch Rocket System.
The Air Force also selected Northrop to develop its Stand-in Attack Weapon with a $705 million contract due to its capabilities and experience with the AARGM-ER.
Due to international conflict -- including now between Israel and Hamas -- demand for AARGM-ER has increased with “interest from more than a dozen countries,” Warden said.
It takes about 18 to 24 months to build up capacity to meet the growing demand for AARGM and other systems, Warden said, which Northrop has taken into account.
“First and foremost, we did what’s necessary, and that is invest in our workforce and our facilities to be able to support that demand,” Warden said. “That’s what’s allowing us to support both our direct customers and primes who are now coming to us asking for that capability.”
Northrop still expects the B-21 Raider’s first test flight to be conducted before the end of the year, leading to the award of the first of five low-rate initial production lots, Chief Financial Officer Dave Keffer said.
The company still doesn’t plan to earn a profit on the first LRIP lot, he said.
“We continue to believe it is reasonably possible one or more of the LRIP options could be performed at a loss and the range of such loss across the five LRIP options,” the financial report states, attributing it to the “company’s estimate of the impact macroeconomic factors” could have.
Looking into 2024, the company expects sales and segment operating income to grow between 4% and 5%.