U.S. Majors Report Increased Defense earnings, Boeing Dragged Down By Commercial Aircraft Segment. By Julian Nettlefold
26 Apr 24. Given the growing conflicts around the world, the US Majors reported a continued uptick in earnings; Boeing was dragged down yy its Commercial Aircraft Segment.
On 11 April Army-technology.com reported that the US set a new record for Foreign Military Sales in 2023. The Director of the Defence Security and Cooperation Agency has said that the US set a $80.9bn record for Foreign Military Sales in 2023.
The Defence Security and Cooperation Agency (DSCA) said that 2023 set a record for US sales of military equipment and hardware, with $80.9bn in business through the Foreign Military Sales (FMS) system.
“That is a record,” said DSCA Director James Hursch, with European nations becoming “huge customers.”
Speaking at the 2024 Sea-Air-Space maritime exposition on 9 April, Hursch went on to highlight the activity of Sweden, Poland, and Netherlands as customers of significant size.
Poland was marked as a special case, joining the US in co-production of defence systems, strengthening its own industrial base in a pattern the US would like to be repeated with other partners and allies around the world, according to Hursch.
“One of the principal lessons we have learned in the Ukraine crisis and looking at ourselves as we’ve gone through this is… the health of our defence industrial base,” he said. “I think we’ve discovered… domestically, we need to pay more attention to that. We have a new National Defense Industrial Base Strategy, which has been published by [DoD’s] acquisition and sustainment office. But I think it’s also true that we’re seeing in Europe an increased focus on the strength of the industrial base. And we’re looking for ways in which we can cooperate across those industrial bases.”
In 2023, Poland also made US purchases of: AH-64E Apache helicopters; High Mobility Artillery Rocket System (HIMARS); the Integrated Air and Missile Defense Battle Command System; and M1A1 Abrams Main Battle tanks.
Nato Allies have made a substantial proportion of US FMS in both 2023 and 2023, with $20bn in fiscal year 2022 and $24bn in fiscal year 2023.
Of the $80.9bn in value of authorised arms transfers and security cooperation programs from 2023, $62.3bn of the sales were to US ally and partner nations and an additional $14.7bn was used through teh Ukraine Security Assistance Initiative and Building Partner Capacity programs under the Foreign Assistance Act. (See: US sets record FMS in 2023 – BATTLESPACE UPDATE Vol.26 ISSUE 15)
Boeing
24 Apr 24. Boeing reports first revenue drop in 7 quarters as deliveries decline. Boeing (BA.N), on Wednesday reported its first quarterly revenue drop in seven quarters, but the U.S. planemaker beat analyst expectations that were lowered after a January mid-air blowout of a door plug prompted it to slow production of its strongest-selling jets. After the report, Boeing CEO Dave Calhoun told CNBC that a deal to acquire its key supplier Spirit AeroSystems (SPR.N), is more than likely during the second quarter. Issues that must be worked out include price and talks with Spirit customer Airbus (AIR.PA), Boeing’s major rival. But Calhoun told analysts Boeing can move forward without full clarity on the Airbus side.
“We’re not being held hostage,” said Calhoun who is leaving by the end of the year.
Quarterly revenue was $16.57bn, down from $17.92bn a year earlier but beating expectations of $16.23bn. Boeing and Spirit Aero shares were down about 3% in early afternoon trade.
Boeing CFO Brian West told analysts second quarter cash burn would be “sizeable” although he expected free cash usage to improve from the $3.93bn cash burn in the first quarter. That was less than the $4.49bn analysts expected following the Jan. 5 accident involving a nearly new 737 MAX 9 jet.
“Well, it could have been worse. While the loss and the cash outflow are not as bad as feared, the company is still clearly facing some serious challenges,” Vertical Research Partners analyst Robert Stallard said in a note.
In the afternoon, Moody’s cut Boeing’s credit rating to the bottom of investment grade. The agency expects headwinds surrounding the company’s commercial airplanes to persist at least through 2026 when Boeing has $8 bn in debt coming due.
Multiple legal actions resulted from the Alaska Airlines accident. Boeing recorded an earnings charge of $443m, net of insurance recoveries, according to a company filing.
Since the accident, the U.S. Federal Aviation Administration (FAA) has imposed a cap on production of single-aisle 737 MAX jets and given Boeing 90 days from Feb. 28 to develop a comprehensive plan to improve quality control.
Reuters reported this month that output of Boeing’s cash-cow 737 MAX had fallen sharply as U.S. regulators stepped up factory checks. Calhoun said production will stay sporadic through the second quarter as the company devises a plan to better monitor its manufacturing system. He said production rates would not rise until the system is under control.
“So, 90 days isn’t like ‘wave a magic flag, and everything is great,’ and you guys can go from 38 to 40″ jets per month,” Calhoun said. Boeing has engaged independent quality experts, whom Calhoun expects will stay for several years.
While Boeing has not named a successor, Calhoun told CNBC he believes commercial airplanes boss Stephanie Pope has potential to run the company.
Analysts have warned the slow pace of deliveries could delay Boeing’s financial and production goals. Boeing’s CFO said last month the company needs more time to hit a goal outlined in 2022 for an annual cash flow of about $10bn by 2025 or 2026.
That goal is seen as key as Boeing works to accelerate its recovery from an earlier crisis after two MAX jets crashed in 2018 and 2019.
Boeing delivered 13 twin-aisle 787 Dreamliner jets in the quarter. It expects production to return to five per month later this year. Calhoun attributed the slowdown to supply chain issues involving airline seats and parts used in cooling.
Yet with production constrained at Boeing and Airbus, demand remains strong, though the European planemaker has increased its lead in the narrowbody market.
Calhoun said Boeing would have “largely delivered” its inventory of 737s and 787s by the end of the year, bringing in much-needed cash. He added that its defense business, which has been losing money, “will be progressing toward more historical levels of performance.”
Operating margins at Boeing’s defense business rebounded to 2.2% in the quarter from a negative 3.2% a year ago, though it still lost $222m on certain fixed-price development programs.
Boeing delivered 67 737s in the quarter through March, down 41% from last year. Planemakers receive the bulk of the cash upon delivery of the aircraft.
Combined with compensation Boeing had to pay airlines for the temporary grounding of MAX 9 aircraft, margins at its commercial airplanes business deteriorated to negative 24.6% from negative 9.2%.
Overall adjusted loss per share narrowed to $1.13, beating expectations of loss per share of $1.76, as per LSEG data. (Source: Reuters)
24 Apr 24. Boeing Reports First Quarter Results.
First Quarter 2024
- Undertaking comprehensive actions in our commercial business to strengthen quality and safety
- Financial results reflect lower 737 deliveries and 737-9 grounding customer considerations
- Revenue of $16.6bn, GAAP loss per share of ($0.56) and core (non-GAAP)* loss per share of ($1.13)
- Operating cash flow of ($3.4)bn and free cash flow of ($3.9)bn (non-GAAP)*
- Total company backlog grew to $529 bn, including over 5,600 commercial airplanes
The Boeing Company [NYSE: BA] recorded first quarter revenue of $16.6 bn, GAAP loss per share of ($0.56) and core loss per share (non-GAAP)* of ($1.13). Boeing reported operating cash flow of ($3.4)bn and free cash flow of ($3.9)bn (non-GAAP)*. Results primarily reflect lower commercial delivery volume.
“Our first quarter results reflect the immediate actions we’ve taken to slow down 737 production to drive improvements in quality,” said Dave Calhoun, Boeing president and CEO. “We will take the time necessary to strengthen our quality and safety management systems and this work will position us for a stronger and more stable future.”
Operating cash flow was ($3.4)bn in the quarter reflecting lower commercial deliveries, as well as unfavorable timing of receipts and expenditures.
Cash and investments in marketable securities totaled $7.5bn, compared to $16.0bn at the beginning of the quarter reflecting debt repayment and free cash flow usage in the quarter. Debt was $47.9bn, down from $52.3bn at the beginning of the quarter due to the pay down of maturing debt. The company has access to credit facilities of $10.0bn, which remain undrawn.
Total company backlog at quarter end was $529bn.
Segment Results
Commercial Airplanes
Commercial Airplanes first quarter revenue of $4.7bn and operating margin of (24.6) percent primarily reflect lower 737 deliveries and 737-9 grounding customer considerations. During the quarter, the 737 program slowed production below 38 per month to incorporate improvements to its quality management system and reduce traveled work within its factory and supply chain. In addition, Commercial Airplanes is implementing a comprehensive action plan to address feedback from the FAA audit of 737 production. Commercial Airplanes booked 125 net orders, including 85 737-10 airplanes for American Airlines and 28 777X airplanes for customers including Ethiopian Airlines. Commercial Airplanes delivered 83 airplanes during the quarter and backlog included over 5,600 airplanes valued at $448bn.
Defense, Space & Security
Defense, Space & Security first quarter revenue was $7.0bn. First quarter operating margin increased to 2.2 percent, primarily driven by higher volume and improved performance. Results also reflect $222m of losses on certain fixed-price development programs. During the quarter, Defense, Space & Security captured awards for 17 P-8A Poseidon aircraft for the Royal Canadian Air Force and German Navy, secured the final new-build production contract from the U.S. Navy for 17 F/A-18 Super Hornets, and was awarded an MQ-25 cost-type contract modification from the U.S. Navy including two additional test aircraft. Backlog at Defense, Space & Security was $61bn, of which 31 percent represents orders from customers outside the U.S.
Global Services
Global Services first quarter revenue of $5.0bn and operating margin of 18.2 percent reflect higher commercial volume and favorable mix.
During the quarter, Global Services opened a maintenance facility in Jacksonville, Florida, supporting military customers and the U.S. Navy exercised options on a P-8 sustainment modification contract.
General Dynamics
25 Apr 24. General Dynamics Reports First-Quarter 2024 Financial Results.
- Revenue of $10.7bn, up 8.6% from year-ago quarter
- Operating earnings of $1bn, up 10.4% from year-ago quarter
- Diluted EPS of $2.88, up 9.1% from year-ago quarter
- Operating margin of 9.7%, a 20 basis-point expansion from year-ago quarter
General Dynamics (NYSE: GD) today reported first-quarter 2024 revenues of $10.7bn, up 8.6% from the first quarter of 2023. Operating earnings of $1bn were up 10.4% from the year-ago quarter, with operating margins expanding 20 basis points to 9.7% from the year-ago quarter. Diluted earnings per share (EPS) were $2.88, up 9.1% from the year-ago quarter.
“Our businesses delivered solid operating results in the quarter, growing revenue and backlog, while expanding margins, even as we awaited G700 certification,” said Phebe N. Novakovic, chairman and chief executive officer. “In the Aerospace segment, the recent FAA certification of the Gulfstream G700 has enabled us to begin customer deliveries. This is a strong start to 2024 and we remain confident in our outlook.”
Cash And Capital Deployment
Net cash used by operating activities in the quarter was $278 m due to growth of operating working capital in both the Aerospace and defense segments. During the quarter, the company invested $159m in capital expenditures, paid $361m in dividends, and used $105m to repurchase more than 390,000 shares, ending the quarter with $1bn in cash and equivalents.
Backlog
The consolidated book-to-bill ratio, defined as orders divided by revenue, was 1-to-1 for the quarter. Company-wide backlog of $93.7bn was up 4.4% from the year-ago quarter. Estimated potential contract value, representing management’s estimate of additional value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $40.3bn. Total estimated contract value, the sum of all backlog components, was $134bn, up 4.4% from the year-ago quarter.
In the Aerospace segment, orders in the quarter totaled $2.4bn, growing backlog to $20.5bn, up 6.2% from the year-ago quarter. Aerospace book-to-bill was 1.2-to-1 for the quarter.
In the defense segments, orders in the quarter totaled $8.8bn, with particular strength in Combat Systems and Technologies, which had book-to-bill ratios of 1.6-to-1 and 1.2-to-1, respectively.
Significant awards in the defense segments included an IDIQ contract from the U.S. Army to provide medium-caliber ammunition cartridges, with a maximum potential value of $3bn among two awardees; $1.3bn, with a maximum potential value of $2bn, from Austria’s ministry of defense to produce Pandur 6×6 wheeled combat vehicles; four IDIQ contracts from the Canadian government with a maximum potential value of $1.3bn to support the Land Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance (C4ISR) system for the Canadian army; $505m, with a maximum potential value of $995m, for several key contracts for classified customers; $325m from the Canadian government to produce armored combat support vehicles; and $310m from the U.S. Navy for maintenance, modernization and repair work on a Wasp-class amphibious assault ship.
Lockheed Martin
23 Apr 24. Lockheed Martin beats Q1 expectations on strong demand, sees supply chain improvement. U.S. weapons maker Lockheed Martin (LMT.N), opens new tab beat Wall Street expectations for first-quarter sales and profit on Tuesday, as simmering geopolitical tensions prompted some countries to boost their defense spending, driving demand for new weapons.
Sales in Lockheed’s missiles and fire control unit jumped 25.3% to nearly $3bn, boosted by strong demand for high mobility artillery rocket system (HIMARS) and guided multiple launch rocket system (GMLRS), key weapons used by Ukraine in its conflict with Russia.
“We saw strong labor and material throughput, indicative of an improving supply chain,” Lockheed CFO Jay Malave said on the post-earnings conference call on Tuesday.
Sales in the company’s aeronautics business, its biggest unit and which makes the F-35 fighter jets, rose 9.2% to $6.85bn.
“These first-quarter results reinforce our confidence in our ability to achieve the full-year financial expectations we set in January,” CEO Jim Taiclet said in a statement.
It had forecast full-year net sales of $68.5bn to $70bn and profit of $25.65 to $26.35 per share.
It started the year with a quarterly profit of $6.39 per share, well above analysts’ expectations of $5.83 per share, according to LSEG data.
The delay in resuming deliveries of its marquee F-35 jet to Pentagon due to the TR-3 software upgrade has left Lockheed with fighter jets in its inventories.
TR-3 refers to a series of enhancements to the F-35, encompassing improved displays, increased computer memory and enhanced processing capabilities.
“The test results to date support our expected timeline of delivering the first TR-3 combat training-capable aircraft in the third quarter and then transition to a fully combat-capable aircraft in 2025,” Taiclet said.
Lockheed’s first-quarter net sales rose 14% to $17.2bn, also beating analysts’ expectations of $16.02bn.
Last week, the U.S. Missile Defense Agency said Lockheed won a $17bn contract to develop the next generation of interceptors to defend the United States against an intercontinental ballistic missile attack.
(Source: Reuters)
23 Apr 24. Lockheed Martin Reports First Quarter 2024 Financial Results.
- Net sales of $17.2bn
- Net earnings of $1.5bn, or $6.39 per share
- Cash from operations of $1.6bn and free cash flow of $1.3bn
- $1.8bn of cash returned to shareholders through dividends and share repurchases
- Reaffirms 2024 financial outlook
Lockheed Martin Corporation [NYSE: LMT] today reported first quarter 2024 net sales of $17.2bn, compared to $15.1bn in the first quarter of 2023. Net earnings in the first quarter of 2024 were $1.5 bn, or $6.39 per share, compared to $1.7bn or $6.61 per share, in the first quarter of 2023. Cash from operations was $1.6bn in both the first quarters of 2024 and 2023. Free cash flow was $1.3bn in both the first quarters of 2024 and 2023. First quarter 2024 results included 13 weeks compared to 12 weeks for first quarter 2023.
“Our strong start to 2024 demonstrates our continued success designing, developing and delivering 21st Century Security solutions in support of integrated deterrence for customers around the world. These first quarter results reinforce our confidence in our ability to achieve the full year financial expectations we set in January,” said Lockheed Martin Chairman, President and CEO Jim Taiclet. “First quarter sales increased significantly year-over-year and we generated robust free cash flow of nearly $1.3bn, while taking assertive actions to further strengthen production capacity. In addition, we continued our disciplined and dynamic capital deployment by investing over $700m into R&D and capital projects and returned significant capital to shareholders through dividends and share repurchases as we remain committed to delivering meaningful free cash flow per share growth over the long-term. Our $159bn backlog includes several large National Security Space awards in the quarter and attests to the breadth of our portfolio, depth of our technical expertise, and understanding of our customers’ needs. These capabilities uniquely position us to lead the realization of joint all domain operations, including reliable battle management and command and control systems integrated across multiple domains, military services, and allied forces. We remain exceptionally focused on the execution of the F-35 program, working with our customers and suppliers to implement TR-3 capabilities, and are encouraged by the progress towards delivery of the first TR-3 configured aircraft. The innovation and open architecture solutions across our portfolio enable customers worldwide to stay prepared and agile amidst an ever-changing threat environment.”
Cash Flows and Capital Deployment Activities
Cash from operations in the first quarter of 2024 was $1.6bn and capital expenditures were $378m, resulting in free cash flow of $1.3bn. The operating and free cash flows for the first quarter of 2024 were comparable to the same period in 2023.
The company’s cash activities in the quarter ended March 31, 2024, included the following:
- paying cash dividends of $780m;
- paying $1.0bn to repurchase 2.3m shares; and
- receiving net proceeds of $2bn from a debt issuance of senior unsecured notes, consisting of $650m aggregate principal amount of 4.50% Notes due 2029, $600m aggregate principal amount of 4.80% Notes due 2034 and $750m aggregate principal amount of 5.20% Notes due 2064.
Segment Results
The company operates in four business segments organized based on the nature of products and services offered: Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS) and Space. The following table presents summary operating results of the company’s business segments and reconciles these amounts to the company’s consolidated financial results.
Net sales and operating profit of the company’s business segments exclude intersegment sales, cost of sales, and profit as these activities are eliminated in consolidation and not included in management’s evaluation of performance of each segment. Business segment operating profit includes the company’s share of earnings or losses from equity method investees as the operating activities of the equity method investees are closely aligned with the operations of the company’s business segments.
Business segment operating profit excludes the FAS/CAS pension operating adjustment, a portion of corporate costs not considered allowable or allocable to contracts with the U.S. Government under the applicable U.S. Government cost accounting standards (CAS) or federal acquisition regulations (FAR), and other items not considered part of management’s evaluation of segment operating performance such as a portion of management and administration costs, legal fees and settlements, environmental costs, stock-based compensation expense, retiree benefits, significant severance actions, significant asset impairments, gains or losses from divestitures, intangible asset amortization expense, and other miscellaneous corporate activities. Excluded items are included in the reconciling item “Unallocated items” between operating profit from the company’s business segments and its consolidated operating profit.
Changes in net sales and operating profit generally are expressed in terms of volume, contract mix, and/or performance (referred to as profit adjustments). Changes in volume refer to increases or decreases in sales or operating profit resulting from varying production activity levels, deliveries or service levels on individual contracts. Volume changes in segment operating profit are typically based on the current profit booking rate for a particular contract. Contract mix refers to changes in the ratio of contract type or life cycle (e.g., cost-type, fixed-price, development, production and/or sustainment). In addition, comparability of the company’s segment sales, operating profit and operating margin may be impacted favorably or unfavorably by changes in profit booking rates on the company’s contracts. Increases in profit booking rates, typically referred to as favorable profit adjustments, usually relate to revisions in the estimated total costs to fulfill the performance obligations that reflect improved conditions on a particular contract. Conversely, conditions on a particular contract may deteriorate, resulting in an increase in the estimated total costs to fulfill the performance obligations and a reduction in the profit booking rate and are typically referred to as unfavorable profit adjustments. Increases or decreases in profit booking rates are recognized in the period they are determined and reflect the inception-to-date effect of such changes.
The company’s consolidated net favorable profit booking rate adjustments represented approximately 11% and 25% of total segment operating profit in the quarters ended March 31, 2024 and March 26, 2023. The decrease in the net favorable profit booking rate adjustments was driven by a $100m reach-forward loss recognized on a classified program at MFC after updating the company’s assessment of the likelihood that the options may be exercised and concluded that an option would be exercised based on progress made on the program and discussions with the customer. In addition to this reach-forward loss, net favorable profit booking rate adjustments were lower by $120m, see the discussion below.
Aeronautics
Aeronautics’ net sales in the first quarter of 2024 increased $576m, or 9%, compared to the same period in 2023. The increase was primarily attributable to higher net sales of $305m on the F-35 program due to higher volume on production, development and sustainment contracts; $155m on classified programs driven by higher volume; and $60m on the F-16 program due to the ramp up on production.
Aeronautics’ operating profit in the first quarter of 2024 was comparable to the same period in 2023. Operating profit increased $50m on the F-16 program as operating profit for the first quarter of 2023 reflects the impact of unfavorable profit adjustments on a production contract and sustainment contracts as a result of schedule delays related to software and technical specification risks that did not recur in the first quarter of 2024. This increase was partially offset by lower operating profit of $30m on the F-35 program primarily due to lower net profit adjustments on production contracts as a result of higher than anticipated material costs, partially offset by higher volume described above. Total net profit booking rate adjustments were $40m lower in the first quarter of 2024 compared to the same period in 2023.
Missiles and Fire Control
MFC’s net sales in the first quarter of 2024 increased $605m, or 25% compared to the same period in 2023. The increase was primarily attributable to higher net sales of $460m for tactical and strike missile programs due to production ramp up on Guided Multiple Launch Rocket Systems (GMLRS), High Mobility Artillery Rocket System (HIMARS), Joint Air-to-Surface Standoff Missile (JASSM) and Long Range Anti-Ship Missile (LRASM) programs; and $100m for integrated air and missile defense programs primarily due to higher volume on PAC-3 and Terminal High Altitude Area Defense (THAAD).
MFC’s operating profit in the first quarter of 2024 decreased $66m, or 18%, compared to the same period in 2023. The decrease was primarily attributable to lower operating profit for tactical and strike missile programs due to a $100m reach-forward loss recognized for an option on a classified program and an unfavorable profit adjustment on HELLFIRE as a result of additional costs expected to be incurred associated with a contract claim, partially offset by the production ramp up described above. Total net profit booking rate adjustments, inclusive of the $100m loss described above, were $120m lower in the first quarter of 2024 compared to the same period in 2023.
Rotary and Mission Systems
RMS’ net sales in the first quarter of 2024 increased $578m, or 16% compared to the same period in 2023. The increase was primarily attributable to higher net sales of $295 m on integrated warfare systems and sensors (IWSS) programs due to new program ramp up within the laser systems portfolio and higher volume on the Aegis and radar programs; $150m for various C6ISR (command, control, communications, computers, cyber, combat systems, intelligence, surveillance, and reconnaissance) programs due to higher volume; and $100m for Sikorsky helicopter programs due to higher volume on Seahawk and CH-53K programs.
RMS’ operating profit in the first quarter of 2024 increased $80m, or 23%, compared to the same period in 2023. The increase was primarily attributable to higher operating profit of $40m on IWSS programs due to higher volume described above and a favorable profit rate adjustment as a result of the delivery of a ground-based radar which retired the technical risk; and $25m on Sikorsky helicopter programs due to higher volume described above and higher margins due to contract mix, partially offset by unfavorable profit adjustments on Seahawk programs. Total net profit booking rate adjustments were $30m lower in the first quarter of 2024 compared to the same period in 2023.
Space
Space’s net sales in the first quarter of 2024 increased $310m, or 10%, compared to the same period in 2023. The increase was primarily attributable to higher net sales of $140m for strategic and missile defense programs due to higher volume on Fleet Ballistic Missile (FBM) and ramp up in the hypersonic and Next Generation Interceptor (NGI) development programs; and higher net sales of $115m for national security space programs due to higher volume on Transport Layer and GPS III programs and ramp up on the Tracking Layer program.
Space’s operating profit in the first quarter of 2024 increased $45m, or 16%, compared to the same period in 2023. The increase was primarily attributable to $30m of higher equity earnings from the company’s investment in United Launch Alliance (ULA) due to higher launch volume, and higher operating profit of $20m on strategic and missile defense programs due to the higher volume described above. These increases were partially offset by lower operating profit of $25 m for national security space programs due to the impact of lower net favorable profit adjustments on Next Gen OPIR as a result of the timing of the award and incentive fee assessments. Total net profit booking rate adjustments were $30m lower in the first quarter of 2024 compared to the same period in 2023.
Total equity earnings/(losses) (primarily ULA) represented approximately $15m or 5% in the first quarter of 2024, compared to approximately $(15)m or (5)% for the same period in 2023.
Northrop Grumman
25 Apr 24. Northrop Grumman Reports First Quarter 2024 Financial Results • Sales increase 9 percent to $10.1bn.
- Operating income increases 13 percent driven by strong performance and cost efficiencies
- Diluted earnings per share increase 15 percent to $6.32
- $1.5bn returned to shareholders through dividends and share repurchases
- Reaffirming 2024 company-level
Northrop Grumman Corporation (NYSE: NOC) reported first quarter 2024 sales increased 9 percent to $10.1bn, as compared with $9.3bn in the first quarter of 2023. First quarter 2024 sales reflect continued strong demand for our products and services. First quarter 2024 net earnings totaled $944m, or $6.32 per diluted share, as compared with $842m, or $5.50 per diluted share, in the first quarter of 2023.
“Northrop Grumman’s first quarter performance includes 9 percent sales and double digit earnings growth, showing we are off to a strong start to the year. We’re also seeing the results of our focus on productivity and cost efficiency to improve operating margin in many of our businesses,” said Kathy Warden, chair, chief executive officer and president. “Robust global defense spending and our strong backlog, along with expanding margins, continue to support our multi-year outlook for free cash flow growth.”
Sales
First quarter 2024 sales increased $832m, or 9 percent, due to higher sales at all four sectors, including 18 percent growth at Aeronautics Systems. First quarter 2024 sales reflect continued strong demand for our products and services. Operating Income and Margin Rate First quarter 2024 operating income increased $124m, or 13 percent, and operating margin rate increased to 10.6 percent, primarily due to higher segment operating income and a benefit associated with the FAS/CAS operating adjustment.
Segment Operating Income and Margin Rate
First quarter 2024 segment operating income increased $102m, or 10 percent, primarily due to higher sales. Segment operating margin rate increased to 10.9 percent and reflects higher operating margin rates at Aeronautics Systems, Defense Systems and Mission Systems, partially offset by a lower operating margin rate at Space Systems.
Federal and Foreign Income Taxes The first quarter 2024 effective tax rate increased to 16.5 percent from 15.6 percent in the prior year period principally due to higher interest expense on unrecognized tax benefits.
Net Earnings
First quarter 2024 net earnings increased $102m, or 12 percent, primarily due to a 13 percent increase in operating income and a $36m increase in the non-operating FAS pension benefit, partially offset by a higher effective tax rate.
Cash Flows
First quarter 2024 cash used in operating activities was comparable with the prior year period. Higher net earnings were offset by changes in trade working capital. First quarter 2024 free cash flow increased $35m, or 3 percent, principally due to lower capital expenditures largely driven by timing. The net use of cash during the first quarter is consistent with the company’s historical timing of operating cash flows, which are generally more heavily weighted towards the second half of the year.
Awards and Backlog
First quarter 2024 net awards totaled $6.5bn and backlog totaled $78.9bn. Significant first quarter new awards include $3.1bn for restricted programs (primarily at Aeronautics Systems, Space Systems, and Mission Systems). As previously disclosed, in January 2024, the company received a termination for convenience in our restricted Space business. The company reduced unfunded backlog by $1.6bn during the first quarter of 2024 related to the termination.
Financial Results
Segment Operating Results
AERONAUTICS SYSTEMS
Sales
First quarter 2024 sales increased $454m, or 18 percent, primarily due to higher volume on restricted programs, a $114m increase on the F-35 program driven by higher volume on sustainment and production contracts, and higher volume on the E-2, Triton and Global Hawk programs. The increases on F-35 and restricted programs are due, in part, to material timing in the first quarter.
Operating Income
First quarter 2024 operating income increased $60m, or 25 percent, due to higher sales and a higher operating margin rate. Operating margin rate increased to 10.0 percent from 9.4 percent principally due to higher net EAC adjustments largely driven by improved performance and cost efficiencies on certain production programs, including F-35 and F/A-18, which more than offset sales growth on a low margin restricted program.
DEFENSE SYSTEMS
Sales
First quarter 2024 sales increased $36m, or 3 percent, primarily due to ramp-up on the Stand-in Attack Weapon (SiAW) program and higher volume on Guided Multiple Launch Rocket Systems (GMLRS) and certain military ammunition and cannon systems programs, partially offset by lower volume due to the completion of an international training program. Operating Income First quarter 2024 operating income increased $17m, or 11 percent, due to a higher operating margin rate and higher sales. Operating margin rate increased to 12.5 percent from 11.6 percent principally due to improved performance driven by changes in contract mix and cost efficiencies.
MISSION SYSTEMS
Sales
First quarter 2024 sales increased $96m, or 4 percent, primarily due to higher restricted sales on advanced microelectronics programs, partially offset by lower sales on the Scalable Agile Beam Radar (SABR) program. Operating Income First quarter 2024 operating income increased $18m, or 5 percent, due to higher sales and a higher operating margin rate. Operating margin rate increased to 14.2 percent from 14.0 percent, primarily due to sales growth on higher margin advanced microelectronics programs and a prior year loss related to an unconsolidated joint venture. These benefits were partially offset by lower net EAC adjustments on certain radar production programs.
SPACE SYSTEMS
Sales
First quarter 2024 sales increased $305m, or 9 percent, primarily due to a $117m increase on the Space Development Agency (SDA) Tranche 2 Transport Layer (T2TL) programs and higher volume on restricted programs, Commercial Resupply Services (CRS) missions, hypersonics programs and the Glide Phase Interceptor (GPI) program. These increases were partially offset by lower volume on the Ground-based Midcourse Defense (GMD) program. Operating Income First quarter 2024 operating income increased $19m, or 6 percent, due to higher sales, partially offset by a lower operating margin rate. Operating margin rate decreased to 9.1 percent from 9.3 percent principally due to a prior year benefit from the sale of a license to a customer, partially offset by an improvement in net EAC adjustments.
RTX
23 Apr 24. RTX beats estimates on military demand, aviation strength. Aerospace and defense major RTX (RTX.N), on Tuesday beat first-quarter earnings estimates, helped by demand for missile defense systems and strength in the commercial aftermarket business.
The aftermarket business gained as airlines had to extend the service life of aircraft to keep up with the recovery in air travel amid the limited availability of new commercial planes.
The Arlington, Virginia-based company reported revenue of $19.3bn on a per-share profit of $1.34 for the quarter.
Analysts on average had expected revenue of $18.41bn and earnings of $1.23 per share, as per LSEG data.
Pratt and Whitney, a subsidiary of RTX, reported a sales rise of 23% amid the ongoing inspection drive to check for potentially flawed components in its geared turbofan (GTF) jet engines.
The GTF engine issue relates to a powder metal used in engine parts, such as high pressure turbine disks and high-pressure compressor disks, that could result in micro-cracks and fatigue.
Following the quality crisis in some GTF engines last year, RTX estimated grounding of 350 jets annually from 2024 through 2026, outlining $6bn to $7bn in recall cost including compensating customers for lost capacity.
Chief Financial Officer Neil Mitchill told Reuters in an interview the company’s negotiations with customers were progressing with agreements finalized with 9 customers who “represent a healthy portion of the fleet,” and 6 more in process.
More than 40 customers operate the PW 1100 engine, he said.
RTX still expects about 350 aircraft to be grounded at any time due to engine removals, “we’re essentially at the peak here in April. It will continue to be at about an average of 350 between 2024 and 2026. So, no changes to those assumptions,” Mitchill said.
Pratt’s operating profit declined as new engine deliveries offset aftermarket benefits. Engine makers often sell new units at discount to make profits over the life of the engine through aftermarket sales.
Driven by strong demand for both original equipment and aftermarket service, sales at RTX’s Collins Aerospace unit, which makes avionics and aerospace components, rose 9%.
International demand for U.S. weaponry is soaring following Russia’s invasion of Ukraine, the specter of Chinese aggression, and conflicts in the Middle East, with countries striking and negotiating new deals to buy arms and looking to speed up existing contracts.
Operating profit at RTX’s defense arm, Raytheon, jumped 74%, aided by its in-demand Patriot defense system, and gains from the divestiture of the cybersecurity, intelligence, and services business.
During the quarter, Raytheon booked a $1.2 bn order for Germany Patriot air and missile defense systems. (Source: Google/Reuters)
23 Apr 24. RTX Reports Q1 2024 Results. RTX delivers strong 12% sales growth; Q1 book-to-bill of 1.34 with an RTX record backlog of $202bn; Reaffirms full year outlook.
RTX (NYSE: RTX) reported first quarter 2024 results.
First quarter 2024
- Sales of $19.3bn, up 12 percent versus prior year on a reported and organic* basis
- GAAP EPS of $1.28, up 32 percent versus prior year, which included $0.29 of acquisition accounting adjustments and a $0.23 benefit from net significant and/or non-recurring items and restructuring
- Adjusted EPS* of $1.34, up 10 percent versus prior year
- Operating cash flow of $0.3bn; Free cash outflow* of $0.1bn
- Gross proceeds of $1.3bn from the completion of the divestiture of Raytheon’s Cybersecurity, Intelligence and Services business
- Company backlog of $202bn; including $125 bn of commercial and $77bn of defense
- Realized $105m of incremental RTX gross cost synergies
Reaffirms outlook for full year 2024
- Sales of $78.0 – $79.0bn
- Adjusted EPS* of $5.25 – $5.40
- Free cash flow* of approximately $5.7bn
“RTX saw strong momentum in the first quarter, delivering 12 percent organic sales* growth and winning over $25bn in new orders across our businesses,” said RTX President and Chief Operating Officer Chris Calio. “We are making progress on our key priorities to deliver for customers and shareowners, including executing on our GTF fleet management plans, which remain on track. We’re operating in one of the strongest demand periods in our history with a record $202 bn backlog and a portfolio of products and services which are fully aligned to our customers’ top priorities. Our focus on execution and driving performance and margin expansion is supported by our CORE operating system, and we continue to invest in operational modernization and production capacity, digital transformation and technological innovation to sustain our growth well into the future.”
First quarter 2024
RTX reported first quarter sales of $19.3bn, up 12 percent over the prior year. GAAP EPS of $1.28 was up 32 percent versus the prior year, and included $0.29 of acquisition accounting adjustments, a $0.21 benefit related to tax audit settlements, an $0.18 net gain related to the Cybersecurity, Intelligence and Services divestiture, a $0.13 charge associated with initiating alternative titanium sources, and $0.03 of restructuring and other net significant and/or non-recurring charges. Adjusted EPS* of $1.34 was up 10 percent versus the prior year.
The company recorded net income attributable to common shareowners in the first quarter of $1.7bn which included $389 m of acquisition accounting adjustments, a benefit of $285 m related to tax audit settlements, a net gain of $241m related to the Cybersecurity, Intelligence and Services divestiture, a $175m charge associated with initiating alternative titanium sources, and $44m of restructuring and other net significant and/or non-recurring charges. Adjusted net income* of $1.8bn was flat versus prior year as growth in adjusted segment operating profit* was more than offset by higher interest expense and lower pension income. Operating cash flow in the first quarter was $342m. Capital expenditures were $467m, resulting in a free cash outflow* of $125m.
Summary Financial Results – Operations Attributable to Common Shareowners
Backlog and Bookings
Backlog at the end of the first quarter was $202bn, of which $125bn was from commercial aerospace and $77bn was from defense.
Notable defense bookings during the quarter included:
- $1.6bn of classified bookings at Raytheon
- $1.2bn for Germany Patriot production at Raytheon
- $818m for NATO GEM-T production at Raytheon
- $623m for international GEM-T production at Raytheon
- $282m for Ukraine NASAMS production at Raytheon
- $251m for international GEM-T production at Raytheon
Segment Results
The company’s reportable segments are Collins Aerospace, Pratt & Whitney, and Raytheon.
Collins Aerospace
Collins Aerospace had first quarter 2024 reported sales of $6,673m, up 9 percent versus the prior year. The increase in sales was driven by a 14 percent increase in both commercial aftermarket and commercial OE, and a 1 percent increase in defense. The increase in commercial sales was driven primarily by strong demand across commercial aerospace end markets, which resulted in higher flight hours and higher OE production rates. The increase in defense sales was driven primarily by higher volume.
Collins Aerospace recorded operating profit of $849m, down 5 percent versus the prior year. Reported operating profit included $175m of charges related to unfavorable purchase commitments and an impairment charge as a result of initiating alternative titanium sources. On an adjusted basis, operating profit* of $1,048m was up 16 percent versus the prior year. The increase in adjusted operating profit* was primarily driven by drop through on higher commercial aftermarket volume, partially offset by unfavorable OE mix, higher space program costs and increased R&D expense.
Pratt & Whitney
Pratt & Whitney had first quarter 2024 reported sales of $6,456m, up 23 percent versus the prior year. The increase in sales was driven by a 64 percent increase in commercial OE, a 21 percent increase in military, and a 9 percent increase in commercial aftermarket. The increase in commercial sales was primarily due to higher GTF OE volume and favorable mix, and higher aftermarket volume. The increase in military sales was driven by higher sustainment volume across multiple platforms and higher development volume driven primarily by the F135 Engine Core Upgrade program.
Pratt & Whitney recorded operating profit of $412m, down 1 percent versus the prior year. The benefit of favorable commercial OE mix and drop through on higher commercial aftermarket volume was partially offset by headwinds from increased commercial OE deliveries, unfavorable commercial aftermarket mix, and the absence of a favorable $60 m prior year contract matter. Higher military volume and favorable mix was more than offset by higher R&D and SG&A expenses. On an adjusted basis, operating profit* of $430 m was down 1 percent versus the prior year.
Raytheon
Raytheon had first quarter 2024 reported sales of $6,659m, up 6 percent versus prior year. The increase in sales was primarily driven by higher volume on land and air defense systems, including Global Patriot, counter-UAS systems and NASAMS, and advanced technology programs.
Raytheon recorded operating profit of $996m, up 74 percent versus the prior year. The increase in operating profit was driven primarily by higher volume and improved net productivity, partially offset by unfavorable mix. Reported operating profit included a $375m net gain on the sale of the Cybersecurity, Intelligence, and Services business. On an adjusted basis, operating profit* of $630m was up 8 percent versus the prior year. (Source: PR Newswire)
Textron
25 Apr 24. Textron Reports First Quarter 2024 Results.
- EPS of $1.03; adjusted EPS of $1.20, up from $1.05 from prior year
- Segment profit of $290m, up $31m from prior year
Textron Inc. (NYSE: TXT) today reported first quarter 2024 net income of $1.03 per share, as compared to $0.92 per share in the first quarter of 2023. Adjusted net income, a non-GAAP measure that is defined and reconciled to GAAP in an attachment to this release, was $1.20 per share for the first quarter of 2024, compared to $1.05 per share in the first quarter of 2023.
“In the quarter, we saw profit growth across our Aviation, Bell, and Systems businesses,” said Textron Chairman and CEO Scott C. Donnelly. “At Aviation, we saw continued strong market demand which contributed to $177m in backlog growth. At Bell, we saw revenue growth driven by the FLRAA program.”
Cash Flow
Net cash used by operating activities of the manufacturing group for the first quarter was $30m, compared to $153m in cash provided last year. Manufacturing cash flow before pension contributions, a non-GAAP measure that is defined and reconciled to GAAP in an attachment to this release, reflected a use of cash of $81m for the first quarter, compared to a cash inflow of $104m last year.
In the quarter, Textron returned $317m to shareholders through share repurchases.
First Quarter Segment Results
Textron Aviation
Textron Aviation’s revenues were $1.2bn, up $39m from last year’s first quarter, reflecting higher pricing of $48m, partially offset by lower volume and mix of $9m.
Textron Aviation delivered 36 jets in the quarter, up from 35 in the first quarter of 2023, and 20 commercial turboprops, down from 34 in last year’s first quarter.
Segment profit was $143m in the first quarter, up $18m from a year ago, primarily reflecting a favorable impact from pricing, net of inflation, of $14m.
Textron Aviation backlog at the end of the first quarter was $7.3bn.
Bell
Bell revenues were $727m, up $106m from the first quarter of 2023, largely reflecting higher military volume of $95m, primarily related to the FLRAA program, partially offset by lower volume on the V-22 and H-1 programs.
Bell delivered 18 commercial helicopters in the quarter, down from 22 in last year’s first quarter.
Segment profit of $80m was up $20m from last year’s first quarter, largely due to a favorable impact from performance of $30m, which included $13m of lower research and development costs.
Bell backlog at the end of the first quarter was $4.5bn.
Textron Systems
Revenues at Textron Systems were $306m, flat with last year’s first quarter.
Segment profit of $38m was up $4m, compared with the first quarter of 2023.
Textron Systems’ backlog at the end of the first quarter was $1.8bn.
Industrial
Industrial revenues were $892m, down $40m from last year’s first quarter, largely due to lower volume and mix of $51m, principally in the Specialized Vehicles product line, partially offset by higher pricing of $16m in the segment.
Segment profit of $29m was down $12m from the first quarter of 2023, primarily due to lower volume and mix at Specialized Vehicles.
Textron eAviation
Textron eAviation segment revenues were $7m and segment loss was $18m in the first quarter of 2024, compared with a segment loss of $9m in the first quarter of 2023, primarily related to higher research and development costs.
Finance
Finance segment revenues were $15m, and profit was $18m.
Restructuring
In the first quarter of 2024, we incurred $14m in special charges under the 2023 restructuring plan, largely related to headcount reductions to improve the cost structures of the Textron Systems and Bell segments in light of the cancellation of the Shadow and FARA programs in the quarter. Textron expects to incur additional severance costs in the second quarter of 2024 in the range of $25m to $30m, largely related to headcount reductions in the Industrial segment. As a result, Textron has expanded its 2023 restructuring plan from the previously announced range of $115m to $135m in pre-tax special charges to a range of $165 m to $170m. (Source: BUSINESS WIRE)