Northrop Grumman (NOC) Q3 2024 earnings summary

Executive summary

• Q3 2024 sales rose 2% year-over-year to $10.0 billion, with net earnings up 9% to $1.0 billion and diluted EPS up 13% to $7.00, driven by strong segment performance and cost efficiencies.

• Year-to-date sales increased 6% to $30.3 billion, with record backlog of $85 billion, supporting future growth confidence.

• Operating margin improved to 11.2% for the quarter and segment operating margin reached 11.5%, the highest in over two years.

• Free cash flow for Q3 was $730 million, supporting capital deployment and shareholder returns, though down year-over-year due to higher tax payments.

• 2024 guidance was raised, with MTM-adjusted EPS now $25.65–$26.05, reflecting strong results and outlook.

Financial highlights

• Q3 segment operating income rose 5% year-over-year to $1.15 billion; segment operating margin expanded to 11.5%.

• Q3 net awards totaled $11.7 billion, with a book-to-bill ratio of 1.17x and international book-to-bill exceeding 2x.

• Effective tax rate for Q3 dropped to 13.6% from 16.2% due to reduced tax reserves.

• Free cash flow for Q3 was $730 million; year-to-date free cash flow reached $859 million, up 82%.

• Cash and cash equivalents stood at $3.3 billion as of September 30, 2024.

Outlook and guidance

• 2024 sales guidance reaffirmed at $41.0–$41.4 billion, targeting 5% annual growth.

• MTM-adjusted EPS guidance increased by $0.75 to $25.65–$26.05.

• Free cash flow for 2024 expected between $2.25–$2.65 billion.

• 2025 outlook projects 3–4% sales growth, margin expansion, and >20% free cash flow growth.

• CapEx expected to decline to $1.5 billion in 2025, but remain above historical norms.