The Third Quarter reporting season kicked off with mixed Results from the US Majors; Boeing’s woes continued with a large loss in Defense, making the giant’s return to profitability longer than forecast.
26 Oct 22. Boeing reports $3.3bn loss as defense programs drag. Boeing on Wednesday reported a nearly $3.3bn loss in the third quarter of 2022, driven by problems with some of its key defense programs.
Boeing said higher manufacturing and supply chain costs and “technical challenges” with the KC-46A Pegasus, VC-25B Air Force One, MQ-25 Stingray, and T-7A Red Hawk programs, as well as NASA’s Commercial Crew program were the main cause of the defense, space and security sector’s $2.8bn in quarterly losses. Other defense sector programs also had “unfavorable performance” that further hurt the quarterly results, the contractor said.
The results marked a significant decline from how Boeing performed in the same quarter a year earlier, when the company recorded a $132m loss. Boeing’s defense sector reported $436m in profit during that period.
The company is now facing a nearly $4.4bn loss so far this year. Its defense sector has lost nearly $3.7bn during the first nine months of 2022.
The KC-46 tanker program has been a persistent drain on Boeing’s finances in recent years, racking up more than $700 m in charges in the first half of 2022. That is on top of the more than $5.4bn in charges the KC-46 had recorded by the end of 2021.
The defense unit’s revenue also dropped year over year, from $6.6bn in the third quarter of 2021 to $5.3 bn in the most recent quarter.
Dave Calhoun, Boeing’s president and chief executive, sent employees a message Wednesday that acknowledged the difficulties in trying to turn the company around.
While Boeing “continue[s] to make important strides in our turnaround effort,” Calhoun said, “we remain in a challenging environment and have more work ahead.”
“Nearly every industry is navigating broad supply chain, inflation, labor and macroeconomic challenges — and we’re certainly no different,” Calhoun continued. “We’re realistic about the environment we face and are taking comprehensive action.”
Calhoun touted the delivery of four MH-139A Grey Wolf test helicopters to the Air Force, and Boeing’s receipt of contracts with the U.S. and Israeli air forces for more KC-46s. He also pointed to Poland’s selection of the AH-64E Apache for its new attack helicopter fleet, and the opening of three new facilities including its Advanced Composite Fabrication Center in Arizona.
“We’re doing important work and are making meaningful progress, together,” Calhoun said. “Turnarounds take time — and we have more work to do — but I am confident in our team and the actions we’re taking for the future.” (Source: Defense News)
26 Oct 22. Boeing Reports Third-Quarter Results.
Third Quarter 2022
- Operating cash flow of $3.2 bn; continue to expect positive free cash flow for 2022
- Resumed 787 deliveries and delivered 9 airplanes
- Recorded losses on fixed-price defense development programs
- Revenue of $16.0bn; GAAP loss per share of ($5.49) and core (non-GAAP)* loss per share of ($6.18)
- Total backlog of $381bn; including over 4,300 commercial airplanes
The Boeing Company [NYSE: BA] reported third-quarter revenue of $16.0bn, GAAP loss per share of ($5.49) and core loss per share (non-GAAP)* of ($6.18). Third-quarter results reflect higher commercial volume and losses on fixed-price defense development programs (Table 1). Boeing generated operating cash flow of $3.2 bn.
“We continue to make important strides in our turnaround and remain focused on our performance,” said Dave Calhoun, Boeing President and Chief Executive Officer. “We generated strong cash in the quarter and are on a solid path to achieving positive free cash flow for 2022. At the same time, revenue and earnings were significantly impacted by losses on our fixed-price defense development programs. We’re squarely focused on maturing these programs, mitigating risks and delivering for our customers and their important missions. We remain in a challenging environment and have more work ahead to drive stability, improve our performance and ensure we’re consistently delivering on our commitments. Despite the challenges, I’m proud of our team and the progress we’ve made to strengthen our company.”
Cash and investments in marketable securities increased to $14.3bn, compared to $11.4bn at the beginning of the quarter, primarily driven by cash from operations. The company has access to credit facilities of $12.0 bn, which remain undrawn.
Total company backlog at quarter-end was $381bn.
Commercial Airplanes third quarter revenue increased to $6.3 bn, driven by the resumption of 787 deliveries and higher 737 deliveries. Operating margin of (10.3) percent also reflects lower abnormal costs as compared to the third quarter of 2021, partially offset by higher period expenses, including R&D expense.
The company also resumed 787 deliveries in late August, following comprehensive reviews to ensure each airplane meets the company’s highest standards. The program is producing at a low rate with an expected gradual return to five per month over time.
Since late 2020, the 737 MAX fleet has completed nearly 1m revenue flights. During the quarter, the company secured net orders for 227 aircraft, including 167 737 airplanes, 27 767 airplanes, 18 777 airplanes, and 15 787 airplanes. Commercial Airplanes delivered 112 airplanes during the quarter and backlog included over 4,300 airplanes valued at $307bn.
Defense, Space & Security
Defense, Space & Security third-quarter revenue decreased to $5.3bn and third-quarter operating margin decreased to (52.7) percent, primarily due to $2.8bn of losses on certain fixed-price development programs, driven by higher estimated manufacturing and supply chain costs, as well as technical challenges. These losses were recorded on the KC-46A, VC-25B, MQ-25, T-7A and Commercial Crew programs. Results were also impacted by unfavorable performance on other programs.
During the quarter, Defense, Space & Security captured KC-46A Tanker awards from the U.S. Air Force for 15 aircraft and the Israeli Air Force for four aircraft, and Poland selected the AH-64E Apache as its future attack helicopter. Defense, Space & Security delivered 34 aircraft and two satellites, including the first four MH-139A Grey Wolf helicopters to the U.S. Air Force. Also during the quarter, Defense, Space and Security opened the Advanced Composite Fabrication Center in Mesa, Arizona.
Backlog at Defense, Space & Security was $55bn, of which 31 percent represents orders from customers outside the U.S.
Global Services third-quarter revenue increased to $4.4bn and third-quarter operating margin increased to 16.5 percent primarily driven by higher commercial services volume and favorable mix, partially offset by lower government services volume.
During the quarter, Global Services was awarded a follow-on KC-767A Performance Based Logistics support contract for the Italian Air Force and received an F/A-18 depot support order for the U.S. Navy. Global Services also signed a Landing Gear Exchange and Airplane Health Management agreement with Ethiopian Airlines. Also in the quarter, Global Services delivered the 100th contracted 737-800BCF to AerCap.
Additional Financial Information
At quarter-end, Boeing Capital’s net portfolio balance was $1.6bn. The change in other income was driven by the absence of a pension settlement charge recorded in the third quarter of 2021. Interest and debt expense decreased due to lower debt balance. The third quarter effective tax rate primarily reflects tax expense due to an increase in the valuation allowance.
27 Oct 22. Honeywell (NASDAQ: HON) today announced results.
- Operating Margin up 90 Basis Points to 19.5%; Segment Margin1 up 60 Basis Points to 21.8%, Exceeding High End of Guidance Range by 60 bps
- Earnings Per Share of $2.28, Adjusted EPS1 of $2.25, Exceeding High End of Guidance Range by 5 Cents
- Operating Cash Flow up 86% to $2.1bn; Free Cash Flow1 up 108% to $1.9bn
- $1.2bn of Capital Deployed to Share Repurchases, Dividends, and Capital Expenditures
- Company Raises Midpoint of Organic Sales Growth, Segment Margin,2 and Adjusted EPS Guidance2,3; Reaffirms Full-Year Free Cash Flow Guidance
Honeywell (NASDAQ: HON) today announced results for the third quarter, which met or exceeded the company’s guidance.
The company reported third quarter sales growth of 6% and organic sales growth1 of 9%, or 10% excluding the impact of the wind down of operations in Russia,4 with double-digit organic sales growth in Honeywell Building Technologies, Performance Materials and Technologies, and Aerospace. Operating margin expanded by 90 basis points to 19.5%, or 110 basis points excluding the year-over-year impact of Quantinuum. Segment margin1 expanded by 60 basis points to 21.8%, or 90 basis points excluding the year-over-year impact of Quantinuum,1 led by 250 basis points of segment margin expansion in Safety and Productivity Solutions. Earnings per share was $2.28, up 27% year over year. Adjusted earnings per share1 was $2.25, up 11% year over year and 5 cents above the high end of the company’s guidance range. Operating cash flow was $2.1bn, up 86% year over year, with an operating cash flow margin of 23.3%. Free cash flow1 was $1.9bn, up 108% year over year, with a free cash flow margin1 of 21.2%, driven by working capital as a result of improved receivables and inventory.
“Honeywell executed exceptionally well in the third quarter, meeting or exceeding guidance for all metrics,” said Darius Adamczyk, chairman and chief executive officer of Honeywell. “Despite ongoing challenges across supply chains, we grew sales by 6% on a reported basis and 9% organically,1 with strong double-digit growth in our advanced materials, commercial aerospace, and building products businesses. Our backlog remains near record levels, closing the third quarter at $29.1bn,5 up 9% year over year, and providing us with confidence in our demand expectations against an increasingly uncertain macroeconomic backdrop. We continued to reap the benefits of our Honeywell Digital transformation investments made over the past few years and we leveraged these digital tools to drive agile commercial and operational actions, which enabled us to stay ahead of the inflation curve, expand margins, and beat the high end of our adjusted EPS guidance. We also executed on our capital deployment strategy, deploying $1.2bn in the quarter, including $0.4bn of share repurchases, and raising our dividend for the 13th time over 12 consecutive years.”
Adamczyk continued, “The Honeywell playbook continues to deliver outstanding results as we successfully maneuver through a challenged operating environment. These operating principles, combined with our attractive end-market exposures and differentiated portfolio of solutions, will allow us to maintain resiliency and continue successfully navigating the current economic crosscurrents. The third quarter was a strong performance for Honeywell, and I remain confident that our best quarters lie ahead.”
As a result of the company’s third-quarter performance and management’s outlook for the remainder of the year, full-year sales are now expected to be in the range of $35.4bn to $35.7bn, up 6% to 7% organically, or up 8% to 9% excluding the one-point impact of COVID-driven mask sales declines and one-point impact of lost Russian sales. Segment margin expansion2 is now expected to be in the range of 60 to 80 basis points, including an approximate (30) basis point impact from investments in the Quantinuum business. Adjusted earnings per share is now expected to be in the range of $8.70 to $8.80. Operating cash flow is expected to be in the range of $5.2bn to $5.6bn and free cash flow1 is expected to be $4.7bn to $5.1bn.
Honeywell sales for the third quarter were up 6% year over year on a reported basis and 9% year over year on an organic basis.
Aerospace sales for the third quarter were up 10% year over year on an organic basis1 led by growth in commercial aviation. Commercial aftermarket demand remained strong as flight hours continued to recover, with both air transport aftermarket and business and general aviation aftermarket sales growing over 20% organically. Commercial original equipment sales increased 30% year over year in the third quarter, primarily driven by higher shipset deliveries to air transport customers. Increased commercial aviation sales were partially offset by lower defense volumes. Segment margin expanded 40 basis points to 27.5%, led by commercial excellence partially offset by cost inflation.
Honeywell Building Technologies sales for the third quarter were up 19% on an organic basis1 year over year including 23% organic sales growth in the building products portfolio. Building solutions also grew double digits organically in the quarter, led by increased project volumes. Segment margin expanded 60 basis points to 24.1% due to commercial excellence, partially offset by cost inflation.
Performance Materials and Technologies sales for the third quarter were up 14% on an organic basis1 year over year despite an approximate 3% headwind from Russia. Sales growth was led by advanced materials, which grew more than 30% organically due to continued pricing actions and improved volumes. Sales strength was also driven by refining catalyst shipments and thermal solutions, both of which were up double digits in the quarter. This growth was partially offset by lower equipment volumes in UOP and lost Russian sales.
Orders increased double digits year over year, headlined by strength in fluorine products within advanced materials. Segment margin expanded 40 basis points to 22.6%, primarily due to commercial excellence, partially offset by cost inflation.
Safety and Productivity Solutions sales for the third quarter decreased 4% on an organic basis1 year over year. Strength in the advanced sensing and gas detection portions of our sensing and safety technologies business and growth in productivity solutions and services was offset by lower volumes in warehouse and workflow solutions and personal protective equipment. Segment margin reached the highest level since 4Q18, expanding 250 basis points year over year to 15.7%, primarily driven by commercial excellence and favorable business mix, partially offset by cost inflation.
In July, the safety and retail and advanced sensing technologies business units were aligned into a new business unit within the Safety and Productivity Solutions segment named sensing and safety technologies, which we will use for reporting purposes going forward. We recast historical periods to reflect this realignment. (Source: PR Newswire)
18 Oct 22. Lockheed expects flat sales in 2023, growth to return in 2024.
Defense contractor Lockheed Martin doesn’t expect sales growth to return until 2024 due to lingering effects from the COVID-19 pandemic and supply chain problems, executives told investors on an earnings call Tuesday.
Until then, Lockheed chief executive Jim Taiclet said during the call, 2023 sales are likely to be essentially flat when compared to 2022.
In financial results released Tuesday, Lockheed reported nearly $16.6bn in sales in the third quarter of 2022, up slightly from the $16 bn in sales over the same three-month period last year. Profits increased to nearly $1.8 bn in the third quarter, about triple the $614 m recorded a year earlier. Last year, pandemic-related supply chain woes dealt a significant blow to Lockheed’s aeronautics, space and missiles and fire control sectors, dragging down profit.
Year to date, the company’s sales are down almost 5%, from $49.3bn in the first nine months of 2021 to nearly $47bn in the same period in 2022.
Chief Financial Officer Jay Malave said on Tuesday’s call the recovery from the COVID-19 pandemic and supply chain shortages “will be more gradual than previously expected,” and drive flat sales in 2023.
Malave said Lockheed’s aeronautics sector’s sales will likely be down slightly next year, due to lower production volume on the F-35. Deliveries of the fighter next year will likely be flat, he said, but that will be because the company recorded sales in advance with long-lead procurements. He expects that to lessen in 2024.
“It’ll be a period of catch-up on sales for aero,” Malave said.
However, Malave said the company’s work on classified programs will be a bright spot for Lockheed Martin in 2023. Taiclet also said both classified programs and programs of record will “ramp up from 2023 to 2024 meaningfully,” and account for the bulk of 2024′s projected growth.
As more F-35 fighters are delivered and flying regularly around the world, he said, that will mean more sustainment work for the company. And as the pandemic’s effects and supply chain troubles wane in 2024, Taiclet said, a steady production rate of 156 F-35s per year — roughly 80 for the U.S. and 75 for international customers — will be achievable. Malave also said production of F-16 fighters, which Lockheed Martin is now building for foreign customers, is also expected to accelerate in 2024.
Meanwhile, Taiclet said Lockheed is “far down the road” on developing autonomous drone wingmen the Air Force wants to team with piloted fighters. He said the systems need more testing, but the company should have “hit a couple of milestones” on the program by the next earnings call in January. Taiclet said the company will be able to share more details on its status then.
He noted Lockheed is making progress on increasing production of High Mobility Artillery Rocket Systems, or HIMARS. The United States in recent months has shipped 16 HIMARS units to Ukraine, which it has used in its fight against Russia.
Lockheed advanced the funding for $65 m in parts it would need to build more HIMARS, before it had a government contract for more, so it could be ready to build them quickly, Taiclet said. He said the company wants to build 96 HIMARS per year, and those long-lead time parts are now being manufactured. (Source: Defense News)
18 Oct 22. Lockheed Martin Reports Third Quarter 2022 Financial Results
- Net sales of $16.6 bn and net earnings of $1.8 bn, or $6.71 per share
- Cash from operations of $3.1 bn and free cash flow of $2.7 bn
- Returned $2.1 bn of cash to shareholders through share repurchases and dividends
- Increased share repurchase authority by $14.0 bn
- Increased quarterly dividend rate 7% to $3.00 per share
- Increased backlog to $140 bn
- Reaffirms 2022 financial outlook
Lockheed Martin Corporation [NYSE: LMT] today reported third quarter 2022 net sales of $16.6bn, compared to $16.0bn in the third quarter of 2021. Net earnings in the third quarter of 2022 were $1.8bn, or $6.71 per share, compared to $614m, or $2.21 per share, in the third quarter of 2021. Cash from operations was $3.1bn in the third quarter of 2022, compared to $1.9bn in the third quarter of 2021. Free cash flow was $2.7bn in the third quarter of 2022, compared to $1.6bn in the third quarter of 2021.
“Lockheed Martin delivered a solid quarter, highlighted by strength in free cash flow, orders, and operating margins, that positions us well to achieve our full-year commitments,” said Lockheed Martin Chairman, President and CEO James Taiclet. “Our continuing ability to deliver strong financial performance in turn enables further investments in the 21st Century Security technologies essential to support our customers in conducting effective Joint All-Domain Operations. These technologies include hypersonics, directed energy, and autonomy, as well as cutting edge digital capabilities in our evolving 5G.MIL® open standards-based architecture. In addition, we are investing in production and sustainment capacity for the solutions needed now to defend our allies and our nation, including F-35, Javelin and HIMARS. Moreover, we today announced an additional $14 bn in share repurchase authority to go with our recently increased, industry-leading dividend for the benefit of our investors.”
Cash Flows and Capital Deployment Activities
Cash from operations in the quarter ended Sept. 25, 2022 was $3.1bn. Capital expenditures were $405 m, resulting in free cash flow of $2.7bn. The increase in operating and free cash flows from the third quarter of 2021 was primarily due to timing of production and billing cycles (primarily the F-35 program) impacting contract assets, the collection of receivables (primarily F-35) and deferral of cash payments for accounts payable (primarily Aeronautics).
The company’s capital deployment activities in the quarter ended Sept. 25, 2022 included the following:
- paying cash dividends of $739m; and
- repurchasing 3.4 m shares for $1.4bn, of which $112m was paid in the fourth quarter of 2022 upon settlement of certain repurchased shares.
Multi-Year $14bn Share Repurchase Program and Dividend Rate Increase
On October 17, 2022, the company’s board authorized the purchase of up to an additional $14.0 bn of Lockheed Martin common stock under its share repurchase program. This multi-year share repurchase program follows the substantial completion of purchases of common stock under the prior repurchase authorization. The company anticipates executing a $4.0 bn accelerated share repurchase program in the fourth quarter of 2022 bringing our total share repurchases for the year to approximately $8.0 bn. The remainder of the repurchase program authorization is expected to be utilized over a three-year period. The company expects to fund the repurchases through a combination of cash on hand and the issuance of debt. The stock repurchase program does not have an expiration date and may be amended or terminated by the board of directors at any time. The amount of shares ultimately purchased and the timing of purchases are at the discretion of management and subject to compliance with applicable law and regulation.
On Sept. 30, 2022, the company increased its quarterly dividend by $0.20 per share, to $3.00 per share, beginning with the dividend payment in the fourth quarter of 2022.
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.
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, and other miscellaneous corporate activities. Excluded items are included in the reconciling item “Unallocated items” between operating profit from our business segments and our consolidated operating profit.
Changes in net sales and operating profit generally are expressed in terms of volume. 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. 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 current period and reflect the inception-to-date effect of such changes. For more information on factors impacting comparability of our segment sales, operating profit and operating margins, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the company’s Annual Report on Form 10-K for the year ended Dec. 31, 2021 and subsequent quarterly reports on Form 10-Q.
The company’s consolidated net favorable profit booking rate adjustments represented approximately 25% of total segment operating profit in the quarter ended Sept. 25, 2022, as compared to 31% in the quarter ended Sept. 26, 2021.
Aeronautics’ net sales during the quarter ended Sept. 25, 2022 increased $521m, or 8%, compared to the same period in 2021. Net sales increased by approximately $425m for the F-35 program due to the recognition of $325 m of sales deferred from the second quarter of 2022 to the third quarter of 2022 until additional contractual authorization and funding was received on the Lot 15 contract and higher volume and net favorable profit adjustments on production contracts; and about $100m on classified contracts primarily due to higher volume that was partially offset by lower net favorable profit adjustments.
Aeronautics’ operating profit during the quarter ended Sept. 25, 2022 increased $45m, or 6%, compared to the same period in 2021. Operating profit increased approximately $70m for the F-35 program due to the recognition of sales and associated operating profit on the Lot 15 contract as described above and higher net favorable profit adjustments on production contracts; and about $15m for the F-22 program due to higher net favorable profit adjustments. These increases were partially offset by lower operating profit of approximately $40m on classified contracts due to the combination of lower net favorable profit adjustments and $25m of unfavorable profit adjustments recorded in the third quarter of 2022. Net favorable profit booking rate adjustments were $20 m lower in the third quarter of 2022 compared to the same period in 2021.
Missiles and Fire Control
MFC’s net sales during the quarter ended Sept. 25, 2022 increased $50m, or 2%, compared to the same period in 2021. The increase was primarily attributable to higher net sales of approximately $95 m for integrated air and missile defense programs due to higher volume (Patriot Advanced Capability-3 (PAC-3)). This increase was partially offset by a decrease of about $55 m for sensors and global sustainment programs as a result of closeout activities related to the Warrior program in 2021.
MFC’s operating profit during the quarter ended Sept. 25, 2022 decreased $31m, or 8%, compared to the same period in 2021. The decrease was primarily attributable to lower operating profit for integrated air and missile defense programs due to lower net favorable profit adjustments of approximately $50m for the PAC-3 program and an unfavorable profit adjustment of about $40m on the Advanced Radar Threat System Variant 2 (ARTS-V2) program, partially offset by the impact of higher volume on PAC-3; and about $10m for sensors and global sustainment programs primarily due to favorable profit adjustments on the Warrior program in the third quarter of 2021 as a result of the program being terminated in March 2021. These net decreases were partially offset by unfavorable profit adjustments of approximately $25m on an energy program in the third quarter of 2021 that did not recur in 2022. Net favorable profit booking rate adjustments were $75m lower in the third quarter of 2022 compared to the same period in 2021.
Rotary and Mission Systems
RMS’ net sales during the quarter ended Sept. 25, 2022 decreased $199m, or 5%, compared to the same period in 2021. The decrease was primarily attributable to lower net sales of approximately $160 m for Sikorsky helicopter programs due to lower production volume and net favorable profit adjustments (Black Hawk); and about $35m for various C6ISR (command, control, communications, computers, cyber, combat systems, intelligence, surveillance, and reconnaissance) programs due to lower volume.
RMS’ operating profit during the quarter ended Sept. 25, 2022 decreased $45m, or 10%, compared to the same period in 2021. The decrease was primarily attributable to approximately $65 m for Sikorsky helicopter programs due to lower net favorable profit adjustments and volume (Black Hawk). This decrease was partially offset by an increase of about $10 m for IWSS programs due primarily to $45m of unfavorable profit adjustments on a ground-based radar program in the third quarter of 2021 that did not recur in the third quarter of 2022, partially offset by lower net favorable profit adjustments on certain programs (TPQ-53 and Vertical Launching System (VLS)). Net favorable profit booking rate adjustments were $15m lower in the third quarter of 2022 compared to the same period in 2021.
Space’s net sales during the quarter ended Sept. 25, 2022 increased $183m, or 7%, compared to the same period in 2021. The increase was primarily attributable to higher net sales of approximately $155m for strategic and missile defense programs due to higher development volume (Next Generation Interceptor (NGI)).
Space’s operating profit during the quarter ended Sept. 25, 2022 increased $37m, or 14%, compared to the same period in 2021. The increase was primarily attributable to approximately $50m of higher equity earnings from the company’s investment in United Launch Alliance (ULA) due to higher launch volume and launch mix. This increase was partially offset by a decrease of about $15 m for commercial civil space programs due to lower net favorable profit adjustments and lower volume (primarily the Orion and Human Lander System (HLS) programs). Operating profit for national security space programs was comparable as an unfavorable profit adjustment of $45m on a commercial ground solutions program in the third quarter of 2021 that did not recur was offset by lower net favorable profit adjustments (Space-Based Infrared System (SBIRS) and classified programs). Net favorable profit booking rate adjustments were $15 m lower in the third quarter of 2022 compared to the same period in 2021.
Total equity earnings (primarily ULA) represented approximately $50m, or 17%, of Space’s operating profit during the quarter ended Sept. 25, 2022. Total equity earnings were not significant during the quarter ended Sept. 26, 2021.
27 Oct 22. Northrop Grumman Reports Third Quarter 2022 Financial Results
- Awards of $8.7bn, Book to Bill of 0.97, YTD Book to Bill of 1.14
- Sales Increased 3 percent to $9.0bn
- Diluted EPS of $5.89 including $0.18 unfavorable impact from marketable securities
- Net cash provided by operating activities of $1.3bn
- 2022 Company-Level Guidance Unchanged for Sales, EPS, and Transaction-adjusted FCF1
Northrop Grumman Corporation (NYSE: NOC) reported third quarter 2022 sales increased 3 percent to $9.0bn, as compared with $8.7bn in the third quarter of 2021. Third quarter 2022 sales reflect strong demand and improving trends in labor availability, partially offset by supply chain delays. Third quarter 2022 net earnings totaled $915m, or $5.89 per diluted share, as compared with $1.1bn, or $6.63 per diluted share, in the third quarter of 2021. Third quarter 2022 net earnings reflect higher sales as well as a $28m, or $0.18 per diluted share, reduction for negative returns on marketable securities related to our non-qualified benefit plans and other non-operating assets. The company expects 2022 sales and diluted earnings per share near the low end of our guidance ranges of approximately $36.2 — $36.6 bn and $24.50 — $25.10, respectively. We continue to expect transaction-adjusted free cash flow1 of $1.5 — $1.8bn based on current tax law, which requires the amortization of current year research and development expenditures over five years.
“Our solid operating performance in the third quarter reflects extensive demand for our capabilities, positive trends in labor availability, and strong program execution,” said Kathy Warden, chair, chief executive officer and president. “We remain focused on performing for our customers and are confident in our ability to continue to grow our business and deliver value to our shareholders.”
Transaction-adjusted Net Earnings and Transaction-adjusted EPS Year to date
2021 net earnings benefited from a gain on the sale of the company’s IT services business. Excluding the gain on sale of the business, associated federal and state income tax expenses, transaction costs, as well as the make-whole premium for early debt redemption from year to date 2021 net earnings, year to date 2022 transaction-adjusted net earnings1 decreased 11 percent and transaction-adjusted EPS1 decreased 8 percent. Net earnings during 2022 and the third quarter of 2021 were not impacted by the sale of the company’s IT services business and do not include any transaction-related adjustments. Transaction-adjusted net earnings and transaction-adjusted EPS1 are measures the company uses to compare performance to prior periods and for EPS guidance.
Third quarter 2022 sales increased $251m, or 3 percent, primarily due to 18 percent growth at Space Systems, partially offset by lower sales at Aeronautics Systems and Defense Systems.
Third quarter 2022 sales reflect strong demand and improving trends in labor availability, partially offset by supply chain delays.
Operating Income and Margin Rate Third quarter 2022 operating income decreased $199m, or 19 percent, primarily due to a $116m reduction in the FAS/CAS operating adjustment and $55m in higher unallocated corporate expense due to a $60m benefit for insurance settlements recognized in the prior year. Third quarter 2022 operating margin rate declined to 9.4 percent primarily due to the lower FAS/CAS operating adjustment and higher unallocated corporate expense, as well as a lower segment operating margin rate. Segment Operating Income and Margin Rate Third quarter 2022 segment operating income decreased $28 m, or 3 percent due to a lower segment operating margin rate, partially offset by higher sales.
Third quarter 2022 segment operating margin rate decreased to 11.2 percent from 11.9 percent principally due to lower net EAC adjustments due, in part, to inflationary pressures. Federal and Foreign Income Taxes The third quarter 2022 ETR decreased to 16.1 percent from 16.6 percent in the prior year period principally due to higher benefits from foreign-derived intangible income. Cash Flows Third quarter 2022 net cash provided by operating activities increased $172m as compared with the same period in 2021 principally due to improved trade working capital, which includes the collection of customer payments that were delayed at the end of the second quarter. Third quarter 2022 transaction-adjusted free cash flow1 was comparable with the prior year period.
Awards and Backlog Third quarter and year to date 2022 net awards totaled $8.7bn and $30.2bn, respectively, and backlog totaled $79.6bn. Significant third quarter new awards include $2.8 bn for restricted programs (at Space Systems, Mission Systems and Aeronautics Systems), $1.3bn for Ground-based Midcourse Defense (GMD) and $0.8bn for SDA Tranche 1 Tracking Layer.
Third quarter 2022 sales decreased $188m, or 7 percent, due to lower volume in both Manned Aircraft and Autonomous Systems, including restricted programs, E-2, and the Joint Surveillance and Target Attack Radar System (JSTARS) program as it nears completion. Operating Income Third quarter 2022 operating income decreased $3m, or 1 percent, due to lower sales, partially offset by a higher operating margin rate. Operating margin rate increased to 10.3 percent from 9.7 percent primarily due to higher net favorable EAC adjustments in Manned Aircraft. Prior year results included a $42m unfavorable EAC adjustment on F-35.
Third quarter 2022 sales decreased $64m, or 5 percent, primarily due to lower scope on an international training program, the completion of a Joint Services support program and wind down of the UKAWACS and JSTARS programs, partially offset by higher volume on the NATO Alliance Ground Surveillance In-Service Support (NATO AGS ISS) and advanced fuze programs.
Operating Income Third quarter 2022 operating income decreased $17m, or 10 percent, primarily due to lower sales and a lower operating margin rate. Operating margin rate decreased to 11.7 percent from 12.4 percent primarily due to lower net favorable EAC adjustments at Battle Management and Missile Systems, partially offset by improved performance in the Mission Readiness business area.
Sales Third quarter 2022 sales increased $20m, or 1 percent, primarily due to higher restricted sales in the Networked Information Solutions business area as well as higher Surface Electronic Warfare Improvement Program (SEWIP) volume. These increases were partially offset by lower volume on Navigation, Targeting and Survivability programs and the Joint Counter RadioControlled Improvised Explosive Device Electronic Warfare (JCREW) program. Operating Income Third quarter 2022 operating income decreased $4m, or 1 percent, due to a lower operating margin rate, partially offset by higher sales. Operating margin rate decreased to 15.0 percent from 15.3 percent principally due to lower net EAC adjustments, largely in the Maritime/ Land Systems & Sensors and Navigation, Targeting & Survivability business areas, partially offset by improved performance on restricted programs at Networked Information Solutions.
Third quarter 2022 sales increased $482m, or 18 percent, due to higher sales in both business areas. Launch & Strategic Missiles sales increased primarily due to ramp-up on development programs, including a $115m increase on the Ground Based Strategic Deterrent (GBSD) program and a $103m increase on the Next Generation Interceptor (NGI) program, as well as higher volume on the GEM63 program in support of Amazon’s Project Kuiper. Sales in the Space business area were driven by a $129m increase due to ramp-up on the Space Development Agency (SDA) Tranche 1 Transport Layer and Tranche 1 Tracking Layer programs awarded in 2022, as well as higher volume on restricted programs and the Commercial Resupply Services (CRS) program. Operating Income Third quarter 2022 operating income was comparable to the prior year period and reflects higher sales and a lower operating margin rate. Operating margin rate decreased to 9.2 percent from 10.7 percent primarily due to lower net EAC adjustments and higher volume on early-stage development programs, such as NGI and GBSD.
25 Oct 22. Raytheon Technologies Reports Q3 2022 Results
RTX Commercial Aerospace drives strong organic sales growth and segment margin expansion; Q3 book-to-bill of 1.32
Raytheon Technologies Corporation (NYSE: RTX) reported third quarter 2022 results.
Third quarter 2022
- Sales of $17.0bn, up 5 percent versus prior year including 6 percent organic growth
- GAAP EPS from continuing operations of $0.94, up 1 percent versus prior year, including $0.27 of acquisition accounting adjustments and net significant and/or non-recurring charges
- Adjusted EPS of $1.21, down 4 percent versus prior year
- Operating cash flow from continuing operations of $778m; Free cash flow of $263m
- Achieved approximately $105m of incremental RTX gross cost synergies
- Repurchased $616m of RTX shares
Outlook for full year 2022
- Sales of $67.0 – $67.3bn, down from $67.75 – $68.75bn
- Adjusted EPS of $4.70 – $4.80, up from $4.60 – $4.80
- Confirms free cash flow of approximately $4.0bn
- Confirms share repurchase of at least $2.5 bn of RTX shares
“Raytheon Technologies delivered strong organic sales growth while also generating adjusted EPS and free cash flow that exceeded our expectations following the continued recovery in the commercial aerospace market and strong customer demand across our business,” said Raytheon Technologies Chairman and CEO Greg Hayes. “While we expect industry-wide challenges to continue near-term, we remain focused on operational excellence, including cost containment and program performance, to deliver on our commitments. Our $168bn company backlog grew over $6bn in the quarter, and will continue to grow as we invest in next-generation technology and innovation to deepen our industry-leading positions to deliver sustained value for our customers and shareowners.”
Third quarter 2022
Raytheon Technologies reported third quarter sales of $17.0bn, up 5 percent over the prior year, including 6 points of organic sales growth partially offset by 1 point of net acquisitions and divestitures headwind. GAAP EPS from continuing operations of $0.94 was up 1 percent versus the prior year and included $0.26 of acquisition accounting adjustments primarily related to intangible amortization and $0.01 of restructuring. Adjusted EPS of $1.21 was down 4 percent versus prior year as growth in segment operating profit was more than offset by the absence of a prior year tax benefit and lower pension income.
The company recorded net income from continuing operations attributable to common shareowners in the third quarter of $1.4 bn, down 1 percent versus prior year and included $398 m of acquisition accounting adjustments and net significant and/or non-recurring charges. Adjusted net income was $1.8 bn, down 6 percent versus prior year. Operating cash flow from continuing operations in the third quarter was $778 m. Capital expenditures were $515 m, resulting in free cash flow of $263 m.
Backlog and Bookings
Backlog at the end of the third quarter was $168 bn, of which $101 bn was from commercial aerospace and $67 bn was from defense.
Notable defense bookings during the quarter included:
- $1.6bn of classified bookings at Raytheon Intelligence & Space (RIS)
- $1.0bn to develop the Hypersonic Attack Cruise Missile (HACM) for the U.S. Air Force at Raytheon Missiles & Defense (RMD)
- $972m for the Advanced Medium-Range Air-to-Air Missile (AMRAAM) for the U.S. Air Force, the U.S. Navy and international customers at RMD
- $524m for F135 sustainment contracts at Pratt & Whitney
- $353m for the Lower Tier Air and Missile Defense Sensor (LTAMDS) Pre-planned Product Improvement program for the U.S Army at RMD
- $278m for F135 production Lots 15 and 16 at Pratt & Whitney
- $226m for AIM-9X Sidewinder for the U.S. Navy at RMD
- $207m for integrated effectors and sensors for Counter-Unmanned Aircraft Systems for the U.S. Army at RMD
The company’s reportable segments are Collins Aerospace, Pratt & Whitney, Raytheon Intelligence & Space (RIS) and Raytheon Missiles & Defense (RMD).
Collins Aerospace had third quarter 2022 adjusted sales of $5,100 m, up 11 percent versus the prior year. The increase in sales was driven by a 25 percent increase in commercial aftermarket and a 16 percent increase in commercial OE, which more than offset a 6 percent decline in military. The increase in commercial sales was driven primarily by the recovery of commercial air traffic which has resulted in higher flight hours, aircraft fleet utilization, and narrowbody deliveries. The decrease in military sales was driven primarily by lower material receipts and decreased volume.
Collins Aerospace recorded adjusted operating profit of $630 m in the quarter, up 31 percent versus the prior year. The increase in adjusted operating profit was primarily driven by drop through on higher commercial aftermarket and OE, which more than offset lower volume on military programs as well as higher SG&A and R&D expense.
Pratt & Whitney
Pratt & Whitney had third quarter 2022 adjusted sales of $5,380m, up 14 percent versus the prior year. The increase in sales was driven by a 26 percent increase in commercial OE and a 23 percent increase in commercial aftermarket which more than offset a 2 percent decrease in military sales. The increase in commercial sales was primarily due to higher shop visits and related spare part sales as well as favorable OE engine mix and volume. The decrease in military sales was driven primarily by lower expected F135 production volume that was partially offset by higher F135 sustainment volume.
Pratt & Whitney recorded adjusted operating profit of $318 m in the quarter, up 68 percent versus the prior year. The increase in adjusted operating profit was primarily driven by drop through on higher commercial aftermarket sales volume and favorable military and commercial OE sales mix, which more than offset higher SG&A and R&D expense.
Raytheon Intelligence Services
RIS had third quarter 2022 adjusted sales of $3,626 m, down 3 percent versus the prior year. The decrease in sales was driven by the divestiture of the Global Training and Services business. Excluding the impact of acquisitions and divestitures and FX, sales were up 2 percent versus prior year. Higher classified sales in Sensing and Effects programs were partially offset by lower sales in Command, Control and Communications, including lower sales of tactical communications systems programs.
RIS recorded adjusted operating profit of $371 m, down 5 percent versus the prior year. The decrease in adjusted operating profit was primarily driven by the impact of the Global Training and Services divestiture that more than offset favorable net program efficiencies.
Raytheon Missiles & Defense
RMD had third quarter 2022 adjusted sales of $3,678 m, down 6 percent versus prior year. The decrease in sales was primarily driven by continuing supply chain constraints and declines on Land Warfare and Air Defense programs and Naval Power programs. These decreases were partially offset by higher volume on Strategic Missile Defense programs including Next Generation Interceptor development.
RMD recorded adjusted operating profit of $416 m, down 15 percent versus the prior year. The decrease in adjusted operating profit was driven primarily by unfavorable program mix, lower volume primarily in Land Warfare and Air Defense programs, and lower net program efficiencies driven by continued supply chain and labor constraints. (Source: PR Newswire)
27 Oct 22. Textron Reports Third Quarter 2022 Results; Narrows Full Year EPS Range and Raises Cash Flow Guidance
- EPS from continuing operations of $1.06, up $0.24 from the third quarter of 2021
- Net cash from operating activities of $356m in the third quarter of 2022
- Aviation backlog $6.4bn, up $524m from the second quarter of 2022
- Full-year EPS outlook narrowed to a range of $3.90 to $4.00
- Full-year cash flow guidance raised to a range of $1.1bn to $1.2bn
Textron Inc. (NYSE: TXT) today reported third quarter 2022 income from continuing operations of $1.06 per share, compared with $0.82 per share, or $0.85 per share of adjusted income from continuing operations, a non-GAAP measure that is defined and reconciled to GAAP in an attachment to this release, in the third quarter of 2021.
“In the quarter, we saw higher segment profit margin and strong cash generation,” said Textron Chairman and CEO Scott C. Donnelly. “The operating results demonstrate the resiliency of our business segments while navigating ongoing supply chain and labor challenges.”
Net cash provided by operating activities of the manufacturing group for the third quarter was $356m, compared to $333m 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 $292m for the third quarter, compared to $271m last year. Year to date, manufacturing cash flow before pension contributions totaled $810m.
In the quarter, Textron returned $200m to shareholders through share repurchases. Year to date, share repurchases totaled $639m.
Textron now expects 2022 earnings per share from continuing operations to be in a range of $3.90 to $4.00. Textron also expects 2022 manufacturing cash flow before pension contributions to be in a range of $1.1bn to $1.2bn, up $300m from the previous outlook, with planned pension contributions of $50m.
Third Quarter Segment Results
Revenues at Textron Aviation of $1.2bn were down $14m from the third quarter of 2021, largely due to lower Citation jet and pre-owned volume, partially offset by favorable pricing and higher aftermarket volume.
Textron Aviation delivered 39 jets in the quarter, down from 49 last year, and 33 commercial turboprops, down from 35 in last year’s third quarter.
Segment profit was $139 m in the third quarter, up $41m from a year ago, largely due to favorable pricing, net of inflation of $31m.
Textron Aviation backlog at the end of the third quarter was $6.4bn.
Bell revenues in the quarter were $754m, down $15m from last year, due to lower military revenues of $112m, primarily in the H-1 program due to lower aircraft and spares volume, offset by higher commercial revenues of $97m. Bell delivered 49 commercial helicopters in the quarter, up from 33 last year. Segment profit of $85m was down $20m from last year’s third quarter, primarily reflecting lower volume and mix, partially offset by favorable pricing, net of inflation. Bell backlog at the end of the third quarter was $4.9bn.
Revenues at Textron Systems were $292m, down $7m from last year’s third quarter, largely due to lower volume. Segment profit of $37m was down $8m, compared with the third quarter of 2021, primarily due to lower volume and mix.
Textron Systems’ backlog at the end of the third quarter was $2.0bn.
Industrial revenues were $849m, up $119m from last year’s third quarter, primarily due to higher volume and mix of $95m and a $58m favorable impact from pricing, principally in the Specialized Vehicles product line, partially offset by an unfavorable impact of $34m from foreign exchange rate fluctuations.
Segment profit of $39m was up $16m from the third quarter of 2021, primarily due to higher volume and mix.
Textron eAviation segment revenues were $5m and segment loss was $8m in the third quarter of 2022, which reflected the operating results of Pipistrel along with research and development costs for initiatives related to the development of sustainable aviation solutions.
Finance segment revenues were $11m, and profit was $7m. (Source: BUSINESS WIRE)