Boeing’s woes and supply chain issues continued to dampen what were mainly positive erults from the US Majors Second Quarter reporting season.
Boeing
31 Jul 24. Boeing posts bigger loss as defense business struggles to turn around. Boeing (BA.N) posted a bigger quarterly loss, as its troubled defense and space business exacerbated the financial strain on the U.S. planemaker that has already scaled back commercial aircraft production to tackle a quality crisis.
Its second-quarter net loss stood at $1.44bn, the company said on Wednesday, compared with $149m a year ago.
Boeing’s Defense, Space and Security unit, one of its three main businesses, has lost bns of dollars in 2023 and 2022, which executives attributed to cost overruns on fixed-price contracts.
Such contracts have high margins but leave defense contractors vulnerable to inflationary pressures that have dented U.S. corporate earnings in the last few years.
The planemaker used to bid aggressively for fixed-price contracts before the pandemic, but has now said it would pivot away from such contracts to stem losses at the business, which amounted to $1.76bn last year.
Ahead of last week’s Farnborough Air Show, the unit’s head had said it was “significantly challenged” during the quarter.
Boeing CFO Brian West said in May the planemaker will burn rather than generate cash in 2024, hamstrung by lower jet deliveries compared to last year.
The company is mired in crisis after a cabin panel on a 737 MAX 9 jets blew off midair in January, which led to a slowdown in production of its top-selling plane and a management shakeup, even as it came under intense regulatory and legal scrutiny.
The U.S. aviation regulator has capped production of 737 MAX jets at 38 per month, though Reuters has reported that Boeing has been producing jets during some weeks at a much lower level.
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That has led to lower deliveries, frustrating customers. During the second quarter, Boeing delivered a total of 92 aircraft, down 32% from last year. (Source: Google/Reuters)
31 Jul 24. Boeing Reports Second Quarter Results.
Second Quarter 2024
• Submitted comprehensive safety and quality plan to the Federal Aviation Administration
• Announced agreement to acquire Spirit AeroSystems in July; transaction expected to close mid-2025
• Revenue of $16.9bn, GAAP loss per share of ($2.33) and core (non-GAAP)* loss per share of ($2.90)
• Operating cash flow of ($3.9)bn and free cash flow of ($4.3)bn (non-GAAP)*
• Total company backlog of $516bn, including over 5,400 commercial airplanes
The Boeing Company [NYSE: BA] recorded second quarter revenue of $16.9bn, GAAP loss per share of ($2.33) and core loss per share (non-GAAP)* of ($2.90)
. Boeing reported operating cash flow of ($3.9)bn and free cash flow of ($4.3)bn (non-GAAP)*
. Results primarily reflect lower commercial delivery volume and losses on fixed-price defense development programs.
“Despite a challenging quarter, we are making substantial progress strengthening our quality management system and positioning our company for the future,” said Dave Calhoun, Boeing president and chief executive officer. “We are executing on our comprehensive safety and quality plan and have reached an agreement to acquire Spirit AeroSystems. While we have more work ahead, the steps we’re taking will help stabilize our operations and ensure Boeing is the company the world needs it to be. We are making important progress in our recovery and will continue to build trust through action and transparency.”
Cash and investments in marketable securities totaled $12.6bn, compared to $7.5bn at the beginning of the quarter driven by the $10.0bn issuance of new debt partially offset by the usage of free cash flow in the quarter. Debt was $57.9 bn, up from $47.9bn at the beginning of the quarter due to the issuance of new debt. The company has access to credit facilities of $10.0 bn, which remain undrawn.
Total company backlog at quarter end was $516bn.
Commercial Airplanes second quarter revenue of $6.0bn and operating margin of (11.9) percent primarily reflect lower deliveries and planned higher period costs, including research and development.
During the quarter, the company submitted its comprehensive safety and quality plan to the Federal Aviation Administration (FAA). The 737 program gradually increased production during the quarter and still plans to increase production to 38 per month by year end. The 787 program maintains plans to return to 5 per month by year end. In July, the company announced an agreement to acquire Spirit AeroSystems, and the 777X program began FAA certification flight testing after obtaining type inspection authorization.
Commercial Airplanes delivered 92 airplanes during the quarter and backlog included over 5,400 airplanes valued at $437bn.
Defense, Space & Security
Defense, Space & Security second quarter revenue was $6.0bn. Second quarter operating margin of (15.2) percent primarily reflects $1.0bn of losses on certain fixed-price development programs, including a $391m loss on the KC-46A program largely driven by a slowdown of commercial production and supply chain constraints. Losses recorded on the T-7A, VC-25B, and Commercial Crew programs reflect higher estimated engineering and manufacturing costs, as well as technical challenges.
During the quarter, Defense, Space & Security captured an award for seven MH-139A helicopters from the U.S. Air Force and delivered the first CH-47F Block II Chinook to the U.S. Army. Backlog at Defense, Space & Security was $59 bn, of which 31 percent represents orders from customers outside the U.S.
Global Services second quarter revenue of $4.9bn and operating margin of 17.8 percent reflect higher commercial volume and mix.
During the quarter, Global Services secured an Apache performance-based logistics contract from the U.S. Army and captured FliteDeck Pro service contracts with Hainan Airlines and Ryanair.
Additional Financial Information
Other unallocated items and eliminations include an earnings charge of $244 m that reflects a fine that would be paid to the U.S. Department of Justice pursuant to an agreement that was recently filed in federal district court, if the agreement is approved.
General Dynamics
24 Jul 24. Lower G700 business jet deliveries hit General Dynamics results, shares fall. General Dynamics, second-quarter revenue above Wall street estimates on Wednesday, but profit slightly missed and fewer high end jets were delivered than expected, and its shares fell 5%.
Despite a 50% increase in business jet deliveries in the quarter, the Gulfstream parent only handed over 11 of its top-of-the-line, most expensive G700 business jets, below the company target of 15.
The U.S. Federal Aviation Administration certified the G700 business jet just days before the quarter began, however persisting supply chain issues caused delivery delays.
“Q2’s EPS miss reflected a large shortfall at Gulfstream, which outweighed robust defense results,” TD Cowen analysts said in a note, adding that they expected investors to be disappointed.
The defense contractor reported an 18% rise in second-quarter revenue on Wednesday, helped by higher demand for its ammunition and nuclear-powered submarines.
“In the Aerospace segment, we are continuing to ramp up the pace of our G700 deliveries and our defense businesses continued to grow, reflecting increased demand in response to the threat environment,” CEO Phebe Novakovic said in a statement.
Despite cost pressures due to constraints on the U.S. defense budget, defense firms continue to see strong demand for military equipment amid ongoing geopolitical conflicts.
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Profits at General Dynamics’ combat systems unit, which makes vehicles and tanks, were $313 m in the quarter, up 25% from a year ago.
The company now sees combat systems’ annual revenue at $8.7bn, a $200m hike from its prior forecast.
It also lifted the full-year revenue forecast for its marine systems segment, which builds nuclear-powered submarines and ships, by $1 bn and now expects $13.4bn to $13.8bn. (Source: Reuters)
24 Jul 24. General Dynamics Reports Second-Quarter 2024 Financial Results.
• Revenue of $12bn, up 18% from year-ago quarter
• Operating earnings of $1.2bn, up 20.2% from year-ago quarter
• Diluted EPS of $3.26, up 20.7% from year-ago quarter
• Operating margin of 9.7%, a 20-basis-point expansion from year-ago General Dynamics (NYSE: GD) today reported second-quarter 2024 revenue of $12bn, up 18% from the second quarter of 2023. Operating earnings of $1.2bn were up 20.2% from the year-ago quarter. Diluted earnings per share (EPS) were $3.26, up 20.7% from the year-ago quarter. Operating margin for the quarter was 9.7%, a 20-basis point expansion from the year-ago quarter, with particular strength in the Technologies and Combat Systems segments. “This was a strong quarter overall, as reflected by solid growth in all key measures from a year ago. Our businesses continue to focus on disciplined execution of their programs, cost and schedule,” said Phebe N. Novakovic, chairman and chief executive officer. “In the Aerospace segment, we are continuing to ramp up the pace of our G700 deliveries and our defense businesses continued to grow, reflecting increased demand in response to the threat environment.” Gulfstream delivered 37 aircraft in the quarter, 31 of which were large-cabin aircraft. This compares with 24 aircraft delivered in the year-ago quarter, of which 18 were large-cabin. Cash and Capital Deployment Net cash provided by operating activities in the quarter was $814m, or 90% of net earnings. During the quarter, the company paid $389m in dividends, invested $201m in capital expenditures, and used $34 m to repurchase shares, ending the quarter with $1.4bn in cash and equivalents on hand. Orders and Backlog The consolidated book-to-bill ratio, defined as orders divided by revenue, was 0.8-to-1 for the quarter. Company-wide backlog was $91.3bn. Estimated potential contract value, representing management’s estimate of additional value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $38.5bn. Total estimated contract value, the sum of all backlog components, was $129.8bn.– more In the Aerospace segment, orders in the quarter totaled $2.7bn. Aerospace backlog of $20bn is 2.8% above the year-ago quarter. In the defense segments, orders in the quarter totaled $7.4bn, with particular strength in Combat Systems, which had a bookto-bill ratio of 1.5-to-1. Significant awards in the defense segments included two contracts from the Canadian government, with options having combined maximum potential value of $1.9bn shared with an industry partner, for the Logistics Vehicle Modernization (LVM) program; $205 m, with options having a maximum potential value of $1.1bn, for planning yard services for the Arleigh Burke-class (DDG-51) guided-missile destroyer program; a $25m contract from the U.S. Army, with maximum potential value of $535m, for systems technical support of the Stryker vehicle fleet; $205m, with options having a maximum potential value of $525m, from the North Carolina Department of Health and Human Services to operate its Medicaid Management Information System; various munitions and ordnance contracts with maximum potential value totaling $460m if all options are exercised; and several key contracts for classified customers with maximum potential value of $665m. A detailed list of significant awards is provided in Exhibit I.
L3Harris
25 Jul 24. L3Harris raises 2024 outlook amid global tensions. L3Harris, raised its outlook for 2024 after beating Wall Street estimates for second-quarter profit on Thursday, betting on sustained weapons demand and robust defense spending amid escalating global security concerns.
The defense firm raised its 2024 adjusted profit forecast to be between $12.85 and $13.15 per share, up from its previous range of $12.70 to $13.05. Analysts were expecting $12.97 per share, according to LSEG.
The ongoing war in Ukraine has driven strong global demand for U.S. weaponry, with nations actively negotiating and securing deals to acquire arms and expedite existing contracts.
The U.S. Congress’s approval in April of an additional $95bn in funding—including aid for replenishing U.S. stockpiles in Ukraine and Israel— has further benefited defense companies like L3Harris.
The defense contractor, formed by the merger of L3 Technologies and Harris Corp in 2019, counts the Pentagon, planemaker Boeing and defense and aerospace giant RTX, among its customers.
Florida-based L3Harris posted an adjusted net income of $3.24 per share, exceeding Wall Street estimates of $3.18 per share.
L3Harris, along with Northrop is one of the top two suppliers of sought-after rocket motors used in guided multiple-launch rocket systems, which have played a crucial role in Ukraine.
The company now expects revenue to be between $21.0bn and $21.3bn, up from its previous estimate of $20.8bn to $21.3bn. Overall sales rose 13% to $5.3bn. (Source: Reuters)
25 Jul 24. L3Harris Technologies Reports Strong Second Quarter 2024 Results, Increases 2024 Guidance.
• Orders1 of $5.2bn; book-to-bill of 1.0x
• Revenue of $5.3bn, up 13%
• Operating margin of 9.0%; adjusted segment operating margin1 of 15.6%
• Diluted earnings per share (EPS) of $1.92; non-GAAP EPS1 of $3.24
• 2024 revenue guidance range increases from $20.8B – $21.3bn to $21.0bn – $21.3bn
• 2024 adjusted segment operating margin1 guidance increases from >15% to 15.2% – 15.4%*
• 2024 Non-GAAP EPS guidance range increases from $12.70 – $13.05 to $12.85 – $13.15*
L3Harris Technologies (NYSE: LHX) reported second quarter 2024 diluted EPS of $1.92, on second quarter revenue of $5.3bn. Second quarter 2024 non-GAAP diluted EPS1 was $3.24, as compared to non-GAAP diluted EPS1 of $2.97 for the second quarter of 2023, a 9% increase.
“We delivered another strong quarter of financial results with improved margins, reflecting our commitment to operational excellence and a relentless focus on execution that delivers value to our customers and shareholders,” said Christopher E. Kubasik, Chair and CEO.
Kubasik added, “As we celebrate the five year anniversary of the L3 and Harris merger, I’m proud of the progress we’ve made as the industry’s Trusted Disruptor. Our first half results reflect progress toward achieving our 2026 financial framework. We are raising our revenue, margin and EPS guidance for the year, underscoring the tangible results of our LHX NeXt initiative, which is focused on streamlining our operations and enhancing our efficiency while transforming the company.”
* A reconciliation is not available. See the note on page 2 and Non-GAAP Financial Measures on page 6 for more information.
*When we provide our expectation for adjusted segment operating margin, effective tax rate on non-GAAP income, non-GAAP EPS and adjusted free cash flow on a forward-looking basis, a reconciliation of these non-GAAP financial measures to the corresponding GAAP measures is not available without unreasonable effort due to the unavailability of items for exclusion from the GAAP measure. We are unable to address the probable significance of this information, the variability of which may have a significant impact on future GAAP results. See Non-GAAP Financial Measures on page 7 for more information.
Revenue: Second quarter revenue increased 13%, primarily driven by the acquisition of Aerojet Rocketdyne (AR) and 1% total organic growth from increased demand for tactical and broadband communication products in our Communication Systems (CS) segment. Growth was also driven by continued demand in Space Systems and classified Intel & Cyber programs within the Space & Airborne Systems (SAS) Segment. This growth was offset by lower volumes in our Airborne Combat Systems business. In the Integrated Mission Systems (IMS) segment, growth in Maritime programs was offset by lower volumes associated with our Commercial Aviation business, the divestiture of which is pending closure.
* A reconciliation is not available. See the note on page 2 and Non-GAAP Financial Measures on page 6 for more information.
Operating Margin:
GAAP: Second quarter operating margin increased 50 bps to 9.0% driven by improved operational performance, partially offset by the impact of increased corporate unallocated items, including intangible amortization from mergers and acquisitions and LHX NeXt implementation costs.
Adjusted segment operating margin1: Expanded 80 bps to 15.6% due to improved operational and program performance across the SAS, IMS and CS segments, including LHX NeXt driven cost savings.
EPS:
GAAP: Second quarter EPS increased 5% to $1.92 due to an increase in operating income, partially offset by the impact of intangible amortization from mergers and acquisitions, LHX NeXt implementation costs and higher interest expense.
Non-GAAP1: Increased 9% to $3.24 driven by higher adjusted segment operating income1, partially offset by higher interest expense.
The largest differences between GAAP and Non-GAAP EPS are attributable to intangible amortization and LHX NeXt implementation costs.
Cash Flows:
Cash from Operations: Second quarter cash from operations was $754 m driven by net income growth and improved working capital performance.
Adjusted free cash flow1: Delivered $714m in adjusted free cash flow1 driven by net income growth, improved working capital performance and adjustments for acquisitions and severance related costs.
SEGMENT RESULTS AND GUIDANCE
SAS
Revenue: Second quarter revenue was flat year-over-year, resulting from continued growth in Space Systems and classified program growth in Intel and Cyber, which was offset by lower volumes in our Airborne Combat Systems business and lower revenues from the divestiture of the antenna business. Excluding this divestiture, organic revenue increased 1%.
Operating Margin: Second quarter operating margin increased 280 bps largely due to the absence of a non-cash charge that impacted 2023, improved operational and program performance, including the impact of the LHX NeXt cost savings initiative.
IMS
Revenue: Second quarter revenue was flat, as higher volumes on Maritime programs were offset by lower volume in our Commercial Aviation business.
Operating Margin: Second quarter operating margin increased 260 bps from improved program performance, including the impact of LHX NeXt cost savings.
CS
Revenue: Second quarter revenue increased 4%, primarily from higher volumes in Broadband Communications and increased Department of Defense (DoD) sales in Tactical Communications.
Operating Margin: Second quarter operating margin decreased 80 bps primarily from higher domestic tactical radio mix and timing of software sales, partially offset by LHX NeXt cost savings and the favorable impact of legal settlements.
AR
Revenue and Operating Margin: Second quarter results are attributed to program execution across Missile Solutions and Space Propulsion and Power Systems. (Source: BUSINESS WIRE)
Lockheed Martin
23 Jul 24. Lockheed Martin lifts 2024 sales target on fighter jet, missile demand. U.S. defense company Lockheed Martin (LMT.N raised its annual sales target on Tuesday, following the unexpected resumption of deliveries of its F-35 aircraft after the Pentagon began accepting the jets last week.
It expects 2024 sales to be between $70.5bn and $71.5bn, versus $68.5bn to $70bn forecast earlier.
Shares of the Bethesda, Maryland-based company were up 3.2% in morning trade.
The U.S. resumed taking F-35 deliveries after a months-long pause on delays on its software upgrade. Lockheed has been upgrading the jets under Technology Refresh 3, or TR-3 program, that gives the F-35 better displays and processing power.
The delivery resumption includes incomplete software upgrades and Pentagon will withhold some payment, the details of which is unknown, until the remaining enhancements are finished.
Lockheed’s F-35 is the world’s largest defense program and contributes around 30% of the company’s revenue.
“The F-35 remains a top priority, and we recently delivered the first TR-3-configured aircraft to the customer and anticipate deliveries for 2024 to meet our expected range of 75-110 F-35s,” said CEO Jim Taiclet.
TR-3 involves both hardware and software improvements and is seen as a pillar of a wider upgrade to the stealth jet known as Block 4.
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The enhancements “are critical steps in ensuring the F-35 remains the most advanced fighter aircraft in the world and the key air vehicle node in the DoD’s joint all domain architecture”, Taiclet said.
Lockheed, however, does not expect the full tech refresh package to be ready for months.
Lockheed’s second-quarter net income of $6.85 per share beat LSEG estimates of $6.46 per share. Total quarterly sales rose 8.5% to $18.12bn, also above the $17.04bn estimated.
(Source: Reuters)
23 Jul 24. Lockheed Martin Reports Second Quarter 2024 Financial Results.
• Net sales of $18.1bn, an increase of 9% year over year
• Net earnings of $1.6bn, or $6.85 per share, inclusive of net non-operational charges of $79m ($63m, or $0.26 per share, after-tax)
• Cash from operations of $1.9bn and free cash flow of $1.5bn
• $1.6bn of cash returned to shareholders through dividends and share repurchases
• 2024 outlook increased for sales, segment operating profit and earnings per share
Lockheed Martin Corporation [NYSE: LMT] today reported second quarter 2024 net sales of $18.1bn, compared to $16.7bn in the second quarter of 2023. Net earnings in the second quarter of 2024 were $1.6bn, or $6.85 per share, compared to $1.7bn, or $6.63 per share, in the second quarter of 2023. Cash from operations was $1.9bn in the second quarter of 2024, compared to $1.1bn in the second quarter of 2023. Free cash flow was $1.5bn in the second quarter of 2024, compared to $771 m in the second quarter of 2023.
“Over the past few months, Lockheed Martin’s people, systems, and platforms have again demonstrated their ability to enhance security in Eastern Europe, the Red Sea, and the Middle East. From the PAC-3’s critical role in air defense, to the Aegis Combat System with AI augmentation, to the F-35 with its advanced sensor and data management capabilities, our company has made major contributions to allied and partner defense. We continue to demonstrate the impact of our 21st Century Security® strategy by harnessing the latest digital technologies to continuously improve mission effectiveness, strengthening and scaling the defense production system, and expanding industrial cooperation among our allies and partners. Consequently, demand for our defense technology solutions remains robust, with a backlog of nearly $160 bn, greater than two times annual revenue,” said Lockheed Martin Chairman, President and CEO Jim Taiclet. “We delivered strong second quarter financial results, with year-over-year growth of 9% in sales and 10% in segment operating profit, and free cash flow generation in excess of $1.5bn. The year-to-date performance gives us confidence to raise our 2024 full-year outlook for sales, segment operating profit, and earnings per share. Operationally, the F-35 remains a top priority, and we recently delivered the first Technology Refresh 3-configured aircraft to the customer and anticipate deliveries for 2024 to meet our expected range of 75-110 F-35s. The TR-3 hardware and software update enables step function improvement in capability to our airmen, sailors, and marines, as well as to our partner and allied nations. This foundational upgrade and the follow-on series of enhancements, known as Block 4, are critical steps in ensuring the F-35 remains the most advanced fighter aircraft in the world and the key air vehicle node in the DoD’s joint all domain architecture.”
2024 Financial Outlook
Cash Flows and Capital Deployment Activities
The increase in operating and free cash flows in the second quarter of 2024 compared to the same period in 2023 was primarily due to improvements in working capital (defined as receivables, contract assets, and inventories less accounts payable and contract liabilities) and the timing of federal tax payments. Improvements in working capital were driven by volume and timing of milestone payments impacting both contract liabilities and contract assets on classified programs at the company’s Space business segment, decreases in inventory due to deliveries of S-70 helicopters at Sikorsky at the company’s RMS business segment, and production and billing cycle timing impacting receivables (primarily F-35 at Aeronautics and Integrated Air and Missile Defense at MFC, partially offset by Integrated warfare systems and sensors at RMS). These improvements were partially offset by the timing of cash payments related to accounts payable (primarily Aeronautics).
The company’s cash activities in the second quarter of 2024, included the following:
• paying cash dividends of $752m;
• paying $850m to repurchase 1.9m shares; and
• making a long-term debt scheduled repayment of $168m.
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.
The company’s consolidated net favorable profit booking rate adjustments represented approximately 21% and 20% of total segment operating profit in the quarters ended June 30, 2024 and June 25, 2023. During the quarter ended June 25, 2023, we recognized a favorable profit adjustment of $65m on an international surveillance and control program due to the positive resolution of a contractual matter, and an unfavorable profit adjustment of $100m on the Canadian Maritime Helicopter Program (CMHP) as a result of increased costs and lower than planned revenues.
Aeronautics
Aeronautics’ net sales in the second quarter of 2024 increased $402m, or 6%, compared to the same period in 2023. The increase was primarily attributable to higher net sales of $335m on the F-35 program due to higher volume on sustainment, development and production contracts; and $105m on the F-16 program due to the ramp up on production.
Aeronautics’ operating profit in the second quarter of 2024 increased $33m, or 5%, compared to the same period in 2023. The increase in operating profit was attributable to $35m from higher volume and program ramp up described above and $25m from favorable contract mix across the portfolio, partially offset by $25m of lower profit booking rate adjustments. The decrease in profit booking rate adjustments was due to a $45m unfavorable profit adjustment on a classified program because of higher than anticipated costs to maintain program objectives, partially offset by higher net favorable profit adjustments across the portfolio.
Missiles and Fire Control
MFC’s net sales in the second quarter of 2024 increased $347m, or 13%, compared to the same period in 2023. The increase was primarily attributable to higher net sales of $320m for tactical and strike missile programs due to production ramp up on Guided Multiple Launch Rocket Systems (GMLRS) and Long Range Anti-Ship Missile (LRASM) programs.
MFC’s operating profit in the second quarter of 2024 increased $79m, or 21%, compared to the same period in 2023, due to $80m of higher profit booking rate adjustments which primarily reflects higher favorable profit booking rate adjustments on PAC-3 and Apache due to better than anticipated cost performance. Additionally, operating profit increased $30m from production ramp up described above, offset by $30m decrease from contract mix.
Rotary and Mission Systems
RMS’ net sales in the second quarter of 2024 increased $651m, or 17%, compared to the same period in 2023. The increase was primarily attributable to higher net sales of $420m on integrated warfare systems and sensors (IWSS) programs due to higher volume on radar programs and the Canadian Surface Combatant (CSC) program, and new program ramp up within the laser systems portfolio; and $160m for Sikorsky helicopter programs due to higher production volume on Black Hawk and CH-53K programs.
RMS’ operating profit in the second quarter of 2024 increased $41m, or 9%, compared to the same period in 2023. The increase in operating profit was attributable to $70m from higher volume described above, partially offset by $20m of lower profit booking rate adjustments. The decrease in profit booking rate adjustments was due to unfavorable profit adjustments on Seahawk and Black Hawk production programs as a result of increased costs, partially offset by the net impact in the second quarter of 2023 of both a $65 m favorable profit adjustment on an international surveillance and control program and a $100m unfavorable profit adjustment on the Canadian Maritime Helicopter Program (CMHP) that did not recur in the second quarter of 2024.
Space
Space’s net sales in the second quarter of 2024 increased $29m, or 1%, compared to the same period in 2023. The increase was primarily attributable to higher net sales of $110m for strategic and missile defense programs due to higher volume on the hypersonics and Fleet Ballistic Missile (FBM) programs; partially offset by lower net sales of $50m for national security space due to lower volume on classified programs and $45m for commercial civil space due to lower volume on the Orion program.
Space’s operating profit in the second quarter of 2024 increased $34m, or 11%, compared to the same period in 2023. The increase in operating profit was attributable to $20m from favorable contract mix across the portfolio and $20m of higher profit booking rate adjustments. The increase in profit booking rate adjustments was due to higher favorable profit adjustments on the FBM program.
Total equity earnings/(losses) (primarily ULA) represented approximately $10m, or 3% of Space’s operating profit in the second quarter of 2024, compared to approximately $20m, or 6% for the same period in 2023.
Income Taxes
The company’s effective income tax rate was 15.8% and 16.2% for the quarters ended June 30, 2024 and June 25, 2023. The rates for both periods benefited from research and development tax credits, tax deductions for foreign derived intangible income and dividends paid to the company’s defined contribution plans with an employee stock ownership plan feature.
Business segment operating profit
Business segment operating profit represents operating profit from the company’s business segments before unallocated income and expense. This measure is used by the company’s senior management in evaluating the performance of its business segments and is a performance goal in the company’s annual incentive plan. Business segment operating margin is calculated by dividing business segment operating profit by sales. The table below reconciles the non-GAAP measure business segment operating profit with the most directly comparable GAAP financial measure, consolidated operating profit.
Northrop Grumman
25 Jul 24. Northrop Grumman lifts 2024 earnings forecast on weapons demand. U.S. defense company Northrop Grumman, raised its forecast for full-year revenue and profit on Thursday, amid increased global defense spending and a strong backlog.
Shares were up 5.1% to $464.77 during the New York trading session.
Chief Executive Officer Kathy Warden told investors on a post earnings conference call that the headwinds for the B-21 Raider program are behind them and they “expect program margin dollars to grow annually from here.”
The B-21 Raider program has incurred losses on initial production contracts.
The ongoing war in Ukraine has fueled a strong demand for U.S. weaponry in Europe, with nations actively engaged in negotiations and striking deals to acquire arms and looking to speed up ongoing contracts.
Northrop now expects annual sales to reach up to $41.4bn, up from its previous forecast of $40.8bn to $41.2bn. It sees adjusted profit per share between $24.90 and $25.30, up from an earlier $24.45 to $24.85 per share.
The U.S. Congress’ recent approval for $95bn additional funding, which includes aid for replenishing U.S. stockpiles in Ukraine and Israel has benefited Northrop.
Other major defense contractors, such as Lockheed Martin, RTX , and General Dynamics are also benefiting from the new funds.
Northrop is facing cost challenges on some of its fixed-price contracts due to inflation, strained supply chains, and labor shortages.
Additionally, the Northrop-managed Sentinel program, aimed at replacing the aging intercontinental ballistic missile system, has significantly exceeded its initial budget estimate.
“Northrop is well positioned for defense work related to nuclear capabilities. We think this is one key area poised for relatively strong spending in coming years with an aggressive Russia on the horizon, as well as newfound cooperation between Russia and China raising the geopolitical stakes.” CFRA Research’s Garrett Nelson said.
The company posted earnings per share of $6.36 for the second quarter ended June 30, up from $5.34 per share a year earlier. Sales rose 7% to $10.22bn.
Profits in Northrop’s Defense Systems segment jumped by 23%, on high demand for ammunition and rocket motors used in guided multiple-launch rocket systems, which are critical in the Ukraine conflict.
Northrop and L3Harris Technologies Inc., are the top companies that supply these sought-after rocket motors.
(Source: Reuters)
25 Jul 24. Northrop Grumman Reports Second Quarter 2024 Financial Results.
• Net awards of $15.1bn; book to bill of 1.5x
• Sales increase 7 percent to $10.2bn
• Operating income increases 13 percent driven by strong performance and cost efficiencies
• Diluted earnings per share increase 19 percent to $6.36
• Operating cash flow of $1.4bn; free cash flow1 increases 80 percent to $1.1bn
• Company raises 2024 sales guidance to $41.0 – $41.4bn and MTM-adjusted EPS1 guidance to $24.90 – $25.30
Northrop Grumman Corporation (NYSE: NOC) reported second quarter 2024 sales increased 7 percent to $10.2bn, as compared with $9.6bn in the second quarter of 2023. Second quarter 2024 sales reflect continued strong demand for our products and services. Second quarter 2024 net earnings totaled $940m, or $6.36 per diluted share, as compared with $812m, or $5.34 per diluted share, in the second quarter of 2023.
“The Northrop Grumman team extended our strong performance into the second quarter with continued double-digit earnings growth, fueled in part by a 7 percent sales increase and expanding operating income. Our diverse portfolio includes capabilities in high demand and we have invested to create capacity and drive productivity to deliver differentiated capabilities for our customers,” said Kathy Warden, chair, chief executive officer and president. “We are laser focused on performance and continue to expand profitability through the deliberate actions we are taking. With strong support for our programs, growing global orders for our products, and solid execution in our business, we are increasing our revenue and EPS guidance for the year.”
Sales
Second quarter 2024 sales increased $642m, or 7 percent, due to higher sales at all four sectors, including 14 percent growth at Aeronautics Systems. Second quarter 2024 sales reflect continued strong demand for our products and services.
Operating Income and Margin Rate Second quarter 2024 operating income increased $123m, or 13 percent, primarily due to $49m of higher segment operating income and $47m of lower unallocated corporate expense. Operating margin rate increased to 10.7 percent from 10.1 percent primarily due to lower unallocated corporate expense and a benefit associated with the FAS/CAS operating adjustment.
Segment Operating Income and Margin Rate
Second quarter 2024 segment operating income increased $49m, or 5 percent, primarily due to higher sales.
Segment operating margin rate decreased to 10.8 percent and reflects lower operating margin rates at Mission Systems and Aeronautics Systems, partially offset by higher operating margin rates at Space Systems and Defense Systems. Federal and Foreign Income Taxes The company’s second quarter 2024 effective tax rate (ETR) increased to 18.0 percent from 17.7 percent in the prior year period principally due to higher interest expense on unrecognized tax benefits.
Net Earnings and Diluted EPS Second quarter 2024 net earnings increased $128m, or 16 percent, primarily due to $123m of higher operating income and a $34m increase in the non-operating FAS pension benefit, partially offset by a higher ETR.
Second quarter 2024 diluted earnings per share increased 19 percent, reflecting a 16 percent increase in net earnings and a 3 percent reduction in weighted-average diluted shares outstanding. Cash Flows Second quarter 2024 cash provided by operating activities increased $506m primarily due to improved trade working capital, largely driven by lower net federal tax payments, partially offset by lower advance payments. Second quarter 2024 free cash flow1 increased $490m, or 80 percent, principally due to higher net cash provided by operating activities. Awards and Backlog Second quarter 2024 net awards totaled $15.1bn and backlog totaled $83.1 bn. During the second quarter of 2024, the company reduced unfunded backlog by $0.7bn related to a termination for convenience on the Next Generation Interceptor (NGI) program at
Space Systems
Operating Results Effective July 1, 2024, the company realigned the Strategic Deterrent Systems (SDS) division, which includes the Sentinel program, from Space Systems to Defense Systems. The realignment is not reflected in the financial information contained in this release (except as it pertains to the company’s updated 2024 guidance). The realignment will be reflected in the company’s operating results beginning in the third quarter of 2024.
AERONAUTICS SYSTEMS
Three Months Ended June 30
Second quarter 2024 sales increased $368m, or 14 percent. This increase was primarily due to higher restricted sales, a $128m increase on F-35 sustainment and production work largely driven by the timing of materials, and higher volume on the Triton program. Operating Income Second quarter 2024 operating income increased $17m, or 6 percent, due to higher sales, partially offset by a lower operating margin rate. Operating margin rate decreased to 10.0 percent from 10.7 percent principally due to sales growth on a low margin restricted program and lower net EAC adjustments. The second quarter 2023 operating margin rate reflected particularly strong performance due, in part, to restricted work.
DEFENSE SYSTEMS
Three Months Ended June 30
Second quarter 2024 sales increased $93m, or 7 percent, primarily due to ramp-up on certain military ammunition programs, higher volume from the timing of materials and increased order quantities on the Guided Multiple Launch Rocket System (GMLRS), ramp-up on the Stand-in Attack Weapon (SiAW) program and higher volume on the Integrated Battle Command System (IBCS) program. These increases were partially offset by lower volume due to the completion of an international training program. Operating Income Second quarter 2024 operating income increased $38m, or 23 percent, due to a higher operating margin rate and higher sales. Operating margin rate increased to 13.5 percent from 11.7 percent principally due to higher net EAC adjustments driven by cost efficiencies and improved performance, as well as changes in contract mix.
MISSION SYSTEMS
Three Months Ended June 30
Second quarter 2024 sales increased $132m, or 5 percent, primarily due to higher volume on restricted advanced microelectronics programs, the timing of materials on marine systems programs, higher volume on the Surface Electronic Warfare Improvement Program (SEWIP) and ramp-up on full-rate production (FRP) awards on the Ground/Air Task Oriented Radar (G/ATOR) program. These increases were partially offset by lower sales on the F-35 program largely due to timing.
Operating Income Second quarter 2024 operating income decreased $40m, or 10 percent, due to a lower operating margin rate, partially offset by higher sales. Operating margin rate decreased to 13.0 percent primarily due to lower net EAC adjustments on certain airborne radar programs due, in part, to production inefficiencies that have driven higher labor costs, as well as changes in contract mix toward more cost-type content.
SPACE SYSTEMS
Three Months Ended June 30
Second quarter 2024 sales increased $85m, or 2 percent, primarily due to a $117m increase on the Space Development Agency (SDA) Tranche 2 Transport Layer (T2TL) programs as they ramp, increased sales on the HALO program and higher materials volume on the GEM 63 program in support of Amazon’s Project Kuiper. These increases were partially offset by lower restricted sales due to a termination for convenience in our restricted space business during the first quarter of 2024.
Operating Income Second quarter 2024 operating income increased $41m, or 14 percent, due to a higher operating margin rate and higher sales. Operating margin rate increased to 9.1 percent from 8.1 percent principally due to changes in contract mix and an improvement in net EAC adjustments. The prior year period included a $15 m write-down of commercial inventory.
25 Jul 24. RTX lifts 2024 profit forecast on strength in aviation sector. U.S. aerospace and defense company RTX, raised its full-year earnings forecast and beat estimates for second-quarter profit on Thursday, aided by a rebound in the broader commercial aviation sector.
RTX stock hit an all time high, trading up 8% at $113 in New York.
Airlines are flying older aircraft to meet the surge in air travel demand amid a shortage of new jets, leading to a bustling aftermarket business and benefiting companies such as RTX.
“The strength in our end-markets and first-half performance gives us the confidence to increase our outlook for adjusted sales and adjusted EPS for the full year,” said CEO Chris Calio.
Meanwhile, strong demand for original equipment and aftermarket services led to a more than twofold jump in quarterly profit at Pratt and Whitney, a subsidiary of RTX, to $542m.
GTF COMPENSATION
Pratt and Whitney — the maker of the popular Geared Turbofan (GTF) engines, which powers Airbus’ A320neo jets — has been conducting an inspection drive to check for potentially flawed components in the GTF jet engines.
RTX said it has reached agreements with more than 18 GTF engine customers.
“We had 9 (agreements) that were completed at the end of the first quarter, we’ve more than doubled that,” Chief Financial Officer Neil Mitchill told Reuters in an interview.
According to a Bernstein note published this month, around 540 GTF-powered Airbus A320neo aircraft are currently grounded due to engine issues.
RTX posted adjusted per-share net income of $1.41 in the quarter, beating analysts’ average estimate of $1.30, according to LSEG data.
The company’s revenue jumped 8% to $19.72 bn during the period.
It expects full-year adjusted profit per share to be between $5.35 and $5.45, compared with its prior forecast range of $5.25 to $5.40.
GE Aerospace, which makes the competing LEAP engines, also raised its full-year profit forecast earlier this week, but flagged persistent supply constraints hurting new engine output. (Source: Reuters)
25 Jul 24. RTX Reports Q2 2024 Results.
RTX delivers solid operational performance and 8% sales growth; Increases 2024 outlook for adjusted sales* and adjusted EPS*, revises free cash flow. RTX (NYSE: RTX) reported second quarter 2024 results.
Second quarter 2024
• Reported sales of $19.7bn, up 8 percent versus prior year and up 10 percent on an organic* basis
• Adjusted sales* of $19.8bn, up 8 percent versus prior year
• GAAP EPS was $0.08 and included $0.29 of acquisition accounting adjustments and $1.04 of other net significant and/or non-recurring items and restructuring, including $0.03 of restructuring and other non-recurring items, a $0.68 charge related to the expected resolution of several legacy legal matters, and a $0.33 charge related to a fixed priced development contract with a foreign customer at Raytheon
• Adjusted EPS* of $1.41, up 9 percent versus prior year
• Operating cash flow of $2.7bn; Free cash flow* of $2.2bn
• Company backlog of $206bn; including $129 bn of commercial and $77bn of defense
• Realized $120m of incremental RTX gross cost synergies
Updates outlook for full year 2024
• Adjusted sales* of $78.75 – $79.5bn, up from $78.0 – $79.0bn
• Adjusted EPS* of $5.35 – $5.45, up from $5.25 – $5.40
• Free cash flow* of approximately $4.7bn, down from approximately $5.7bn
“RTX delivered strong operational performance in the second quarter, with 10 percent organic sales* growth, adjusted margin* expansion across all three segments and $2.2bn in free cash flow*,” said RTX President and CEO Chris Calio. “The strength in our end markets and first half performance give us the confidence to increase our outlook for adjusted sales* and adjusted EPS* for the full year.”
“With a $206 bn backlog and unprecedented demand across our portfolio, we are focused on executing on our customer commitments powered by our CORE operating system, investing in innovative technologies and capabilities, and leveraging the breadth and scale of RTX to drive long-term shareowner value.”
Second quarter 2024
RTX reported second quarter sales of $19.7bn, up 8 percent over the prior year. Adjusted sales* were $19.8bn, also up 8 percent over the prior year. GAAP EPS of $0.08 was down 91 percent versus the prior year, and included $0.29 of acquisition accounting adjustments, $0.03 of restructuring and other net significant and/or non-recurring charges, a $0.68 charge related to the expected resolution of several legacy legal matters and a $0.33 charge related to a fixed price development contract with a foreign customer at Raytheon. Adjusted EPS* of $1.41 was up 9 percent versus the prior year.
The company reported net income attributable to common shareowners in the second quarter of $111m which included $393m of acquisition accounting adjustments, $35m of restructuring and other net significant and/or non-recurring charges, a charge of $918m related to the expected resolution of several legacy legal matters and a $43 m charge related to a fixed price development contract with a foreign customer at Raytheon. Adjusted net income* of $1.9bn was flat versus prior year as growth in adjusted segment operating profit* was offset by higher interest and tax expenses, and lower pension income. Operating cash flow in the second quarter was $2.7bn. Capital expenditures were $537m, resulting in a free cash flow* of $2.2bn.
Legacy Legal Matters
The Company has made progress in the quarter on resolving several outstanding legal matters which has resulted in an EPS charge of $0.68 associated with the expected resolution of these matters. The Company expects to enter into a deferred prosecution agreement with the Department of Justice (DOJ) and to be subject to an administrative order with the Securities and Exchange Commission (SEC) to resolve the previously disclosed criminal and civil government investigations into improper payments made by Raytheon Company and its joint venture, Thales-Raytheon Systems (TRS), in connection with certain Middle East contracts since 2012. The Company also expects to enter into a deferred prosecution agreement and an False Claims Act (FCA) settlement with the DOJ to resolve previously disclosed criminal and civil government investigations into defective pricing claims for certain legacy Raytheon Company contracts entered into between 2011 and 2013 and in 2017. The charge also includes the impact of certain voluntarily disclosed export controls violations primarily identified in connection with the integration of Rockwell Collins and, to a lesser extent, Raytheon Company into RTX, including certain violations expected to be resolved pursuant to a consent agreement with the Department of State (DOS). In total, RTX recorded an aggregate charge of $918m in the quarter, bringing the total associated reserve for these matters to $1.24bn. Based upon the current status of discussions, we believe that the finalization of our respective agreements with the DOJ, SEC and DOS will occur during the second half of 2024 and therefore, expect approximately $1.0bn of related payments to be made within the same timeframe with the balance to be paid over the next several years. The items above have been incorporated in our updated 2024 free cash flow* outlook.
Collins Aerospace had second quarter 2024 reported sales of $6,999m, up 10 percent versus the prior year. The increase in sales was driven by a 12 percent increase in commercial aftermarket, a 10 percent increase in commercial OE, and a 7 percent increase in defense. The increase in commercial sales was driven primarily by an increase in commercial air traffic, including in higher flight hours, and increased volume across all OEM sales channels. The increase in defense sales was driven primarily by higher volume.
Collins Aerospace reported operating profit of $1,118m, up 24 percent versus the prior year. The increase in operating profit was primarily driven by drop through on higher commercial aftermarket volume, as well as higher defense and commercial OE volume. On an adjusted basis, operating profit* of $1,145m was up 25 percent versus the prior year.
Pratt & Whitney
Pratt & Whitney had second quarter 2024 reported sales of $6,802m, up 19 percent versus the prior year. The increase in sales was driven by a 33 percent increase in commercial OE, a 16 percent increase in military, and a 15 percent increase in commercial aftermarket. The increase in commercial sales was primarily due to higher volume and favorable mix within aftermarket as well as higher GTF OE volume and favorable mix. The increase in military sales was driven by higher sustainment volume across multiple platforms.
Pratt & Whitney reported operating profit of $542m, up 136 percent versus the prior year. Drop through on higher commercial aftermarket volume as well as favorable Large Commercial OE and commercial aftermarket mix, was partially offset by higher Large Commercial OE deliveries and the absence of a $60 m favorable prior year contract matter. Higher military volume and favorable mix was more than offset by higher production costs and higher R&D and SG&A expenses. The prior year reported operating profit included the impact of a charge related to a customer insolvency of $181m. On an adjusted basis, operating profit* of $537m was up 23 percent versus the prior year.
Raytheon
Raytheon had second quarter 2024 reported sales of $6,511m, down 3 percent versus prior year as higher volume on land and air defense systems including Global Patriot, counter-UAS programs and Stinger was more than offset by the divestiture of the Cybersecurity, Intelligence and Services business completed in the first quarter of 2024. Adjusted sales* of $6,581 m were down 2 percent versus prior year. Excluding the impact of acquisition and divestitures, sales were up 4 percent versus prior year*.
Raytheon reported operating profit of $127m, down 80 percent versus the prior year. Drop through on higher volume, favorable mix, and improved net productivity was more than offset by a $575m charge related to the anticipated termination of a fixed price development contract with a foreign customer which was contracted in 2016 under legacy Raytheon Company. On an adjusted basis, operating profit* of $709m was up 7 percent versus the prior year.
*Adjusted net sales, organic sales, adjusted operating profit (loss) and margin, adjusted segment operating profit (loss) and margin, adjusted net income, adjusted earnings per share (“EPS”), adjusted effective tax rate and free cash flow are non-GAAP financial measures. When we provide our expectation for adjusted net sales, adjusted EPS and free cash flow on a forward-looking basis, a reconciliation of these non-GAAP financial measures to the corresponding GAAP measures (expected diluted EPS and expected cash flow from operations) is not available without unreasonable effort due to potentially high variability, complexity, and low visibility as to the items that would be excluded from the GAAP measure in the relevant future period, such as unusual gains and losses, the ultimate outcome of pending litigation, fluctuations in foreign currency exchange rates, the impact and timing of potential acquisitions and divestitures, and other structural changes or their probable significance. The variability of the excluded items may have a significant, and potentially unpredictable, impact on our future GAAP results. See “Use and Definitions of Non-GAAP Financial Measures” below for information regarding non-GAAP financial measures.
Textron
18 Jul 24. Textron Reports Second Quarter 2024 Results
• EPS of $1.35; adjusted EPS of $1.54, up from $1.46 in prior year
• Net cash from operating activities of $383m in the second quarter of 2024
• $358m returned to shareholders through share repurchases in the second quarter
Textron Inc. (NYSE: TXT) today reported second quarter 2024 income from continuing operations of $1.35 per share, as compared to $1.30 per share in the second quarter of 2023. Adjusted income from continuing operations, a non-GAAP measure that is defined and reconciled to GAAP in an attachment to this release, was $1.54 per share for the second quarter of 2024, compared to $1.46 per share in the second quarter of 2023.
“In the quarter, our team delivered higher revenue, earnings per share, and cash flow,” said Textron Chairman and CEO Scott C. Donnelly. “At Aviation and Bell, we continued to execute on key programs, including the Citation Ascend and FLRAA.”
Cash Flow
Net cash provided by operating activities of the manufacturing group for the second quarter was $383m, compared to $314m 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, totaled $320 m for the second quarter, compared to $242m last year.
In the quarter, Textron returned $358m to shareholders through share repurchases. Year to date, Textron has returned $675 m to shareholders through share repurchases.
Second Quarter Segment Results
Textron Aviation
Textron Aviation’s revenues were $1.5bn, up $113m from last year’s second quarter, reflecting higher pricing of $57m and higher volume and mix of $56m.
Textron Aviation delivered 42 jets in the quarter, down from 44 in the second quarter of 2023, and 44 commercial turboprops, up from 37 in last year’s second quarter.
Segment profit was $195m in the second quarter, up $24m from a year ago, reflecting higher volume and mix of $35m, and a favorable impact from pricing, net of inflation, of $22m, partially offset by an unfavorable impact from performance of $33m.
Textron Aviation backlog at the end of the second quarter was $7.5bn.
Bell
Bell revenues were $794m, up $93m from the second quarter of 2023, largely reflecting higher military volume of $104m, primarily related to the FLRAA program, partially offset by lower volume on the V-22 program.
Bell delivered 32 commercial helicopters in the quarter, down from 35 in last year’s second quarter.
Segment profit of $82 m was up $17 m from last year’s second quarter, largely due to a favorable impact from performance of $39m, which included lower research and development costs, partially offset by mix.
Bell backlog at the end of the second quarter was $4.2bn.
Textron Systems
Revenues at Textron Systems were $323m, up $17m from last year’s second quarter, primarily due to higher volume of $14m.
Segment profit of $35 m was down $2m, compared with the second quarter of 2023.
Textron Systems’ backlog at the end of the second quarter was $1.7 bn.
Industrial
Industrial revenues were $914m, down $112m from last year’s second quarter, mainly due to lower volume and mix of $119m.
Segment profit of $42m was down $37m from the second quarter of 2023, primarily due to lower volume and mix.
Textron eAviation
Textron eAviation segment revenues were $9m and segment loss was $18m in the second quarter of 2024, compared with a segment loss of $12m in the second quarter of 2023.
Finance
Finance segment revenues were $12m, and profit was $7m. (Source: BUSINESS WIRE)