The Fourth Quarter US Majors reporting season kicked off with mixed results.  General Dynamics and RTX reported steady growth from increased war related orders whilst Lockheed was hit By F-35 Supply Chain woes, whilst Northrop was hit by B-21 $1.2bn Write Off.

 

Boeing

31 Jan 24. Boeing Reports Fourth Quarter Results.

Fourth Quarter 2023

• Delivered 157 commercial airplanes and recorded 611 net orders
• 787 production rate at five per month; 737 production rate at 38 per month
• Generated $3.4bn of operating cash flow and $3.0bn of free cash flow (non-GAAP)

Full Year 2023

• Delivered 528 commercial airplanes and recorded 1,576 net orders
• Total company backlog grew to $520bn, including over 5,600 commercial airplanes
• Generated $6.0bn of operating cash flow and $4.4bn of free cash flow (non-GAAP)

The Boeing Company [NYSE: BA] recorded fourth quarter revenue of $22.0bn, GAAP loss per share of ($0.04) and core loss per share (non-GAAP)* of ($0.47). Boeing reported operating cash flow of $3.4bn and free cash flow of $3.0bn (non-GAAP). Results improved on higher commercial volume and performance.

“While we report our financial results today, our full focus is on taking comprehensive actions to strengthen quality at Boeing, including listening to input from our 737 employees that do this work every day,” said Dave Calhoun, Boeing president and chief executive officer. “As we move forward, we will support our customers, work transparently with our regulator and ensure we complete all actions to earn the confidence of our stakeholders.”

, “Non-GAAP Measures Disclosures.”

Operating cash flow was $3.4bn in the quarter reflecting higher volume and favorable receipt timing.

Cash and investments in marketable securities totaled $16.0bn, compared to $13.4bn at the beginning of the quarter. The company has access to credit facilities of $10.0bn, which remain undrawn.

Total company backlog at quarter end was $520bn.

Segment Results

Commercial Airplanes

Commercial Airplanes fourth quarter revenue increased to $10.5 bn driven by higher deliveries and favorable mix (Table 4). Operating margin of 0.4 percent also reflects improved performance and lower abnormal costs.

The company continues to cooperate transparently with the FAA following the Alaska Airlines Flight 1282 accident involving a 737-9. Commercial Airplanes is taking immediate actions to strengthen quality on the 737 program, including requiring additional inspections within its factory and at key suppliers, supporting expanded oversight from airline customers and pausing 737 production for one day to refocus its employees on quality. The company has also appointed an outside expert to lead an in-depth independent assessment of Commercial Airplanes’ quality management system, with recommendations provided directly to Calhoun and the Aerospace Safety Committee of Boeing’s Board of Directors.

The 737 program continues to deliver airplanes and its production rate is now at 38 per month. The 787 program production rate is now at five per month.

During the quarter, Commercial Airplanes booked 611 net orders, including 411 737, 98 777X, and 83 787 airplanes, began certification flight testing on the 737-10, and resumed production on the 777X program. Commercial Airplanes delivered 157 airplanes during the quarter and backlog included over 5,600 airplanes valued at $441bn.

Defense, Space & Security

Defense, Space & Security fourth quarter revenue was $6.7bn. Fourth quarter operating margin was (1.5) percent, primarily driven by $139m of losses on certain fixed-price development programs. Results were also impacted by unfavorable performance and mix on other programs.

During the quarter, Defense, Space & Security captured an award from the U.S. Air Force for 15 KC-46A Tankers, began the U.S. Air Force developmental flight test program for the T-7A Red Hawk, and Canada selected the P-8A Poseidon as its multi-mission aircraft. Backlog at Defense, Space & Security was $59bn, of which 29 percent represents orders from customers outside the U.S.

Global Services

Global Services fourth quarter revenue of $4.8bn and operating margin of 17.4 percent reflect higher commercial volume and mix.

During the quarter, Global Services opened its first parts distribution center in India and received a follow-on contract option to provide sustainment for the C-17 Globemaster III.

Additional Financial Information

Other unallocated items and eliminations primarily reflects timing of allocations. The fourth quarter effective tax rate primarily reflects tax expense on pre-tax losses driven by an increase in the valuation allowance.

 

 

General Dynamics

 

24 Jan 24. General Dynamics Reports Fourth-Quarter and Full-Year 2023 Financial Results.

• Fourth-quarter net earnings of $1bn, diluted EPS of $3.64, on revenue of $11.7 bn
• Highest quarterly EPS and revenue in company history
• $1.2 bn net cash provided by operating activities, or 119% of net earnings
• Ended the quarter with $93.6 bn in backlog

 

General Dynamics (NYSE: GD) today reported quarterly net earnings of $1bn, or $3.64 diluted earnings per share (EPS). Revenue of $11.7 bn was up 7.5% over the year-ago quarter.

For the full year, net earnings were $3.3bn, or $12.02 per diluted share. Full-year revenue was $42.3bn, a 7.3% increase from 2022.

“We had a solid fourth quarter, capping off a year that saw growth in all four segments and continued strong cash flow,” said Phebe N. Novakovic, chairman and chief executive officer. “Our Aerospace segment in particular saw solid execution and continued demand in the quarter and is well positioned for a surge in deliveries upon FAA certification of the G700.”

Cash

Net cash provided by operating activities in the quarter totaled $1.2 bn, or 119% of net earnings. For the year, net cash provided by operating activities totaled a record-high $4.7bn, or 142% of net earnings.

During the year, the company reduced debt by $1.2bn, invested $904 m in capital expenditures, paid $1.4 bn in dividends, and used $434 m to repurchase shares, ending 2023 with $1.9bn in cash and equivalents on hand.

Backlog

Orders remained strong across the company with a consolidated book-to-bill ratio, defined as orders divided by revenue, of 0.8- to-1 for the quarter and 1.1-to-1 for the year. Backlog of $93.6bn was the highest year-end backlog in the company’s history. In addition to backlog, estimated potential contract value, representing management’s estimate of additional value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $38.3bn at year end. Total estimated contract value, the sum of all backlog components, was $132 bn at the end of the year.

In the Aerospace segment, orders in the quarter totaled $3.2bn, growing backlog to $20.5bn, up 4.8% from the year-ago quarter. Aerospace book-to-bill was 1.2-to-1 for the quarter and the year.

In the three defense segments, significant awards in the quarter included an IDIQ contract with maximum potential value of $2.5 bn from the Indian Health Service to modernize its electronic health record system; an IDIQ contract with maximum potential value of $975 m to provide mission command training and technical support services to the U.S. Army; $395 m, with options having maximum potential value of $840m, for maintenance and modernization of two U.S. Navy Arleigh Burke-class (DDG-51) guided-missile destroyers; a contract with maximum potential value of $420 m to provide ongoing lead yard services for the Navy’s DDG-51 program; $265 m for various munitions and ordnance; and $245m, with maximum potential value of $590 m, for several key contracts for classified customers.

 

L3Harris

 

25 Jan 24. L3Harris’ fourth-quarter results top estimates on weapons demand. L3Harris (LHX.N), opens new tab beat estimates for fourth-quarter profit on Thursday, benefiting from higher weapons demand and increased global defense spending amid escalating security concerns.

U.S. defense companies are experiencing a surge in contracts on account of the Russia-Ukraine war, the Middle East crisis and the specter of Chinese aggression, but growth is capped by persisting labor and supply chain disruptions.

L3Harris expects its 2024 sales to be between $20.7 bn and $21.3 bn, below LSEG estimates of $21.45bn, sending its shares down about 3% in extended trading.

Peers Lockheed Martin (LMT.N), opens new tab also forecast its 2024 profit below analysts estimates this week, while Northrop Grumman (NOC.N), opens new tab posted a fourth-quarter loss.

L3Harris had said last month it would suspend its merger and acquisition activity for the “foreseeable future”, in its efforts to strengthen balance sheet.

The company, formed by the merger of L3 Technologies and Harris Corp in 2019, counts the Pentagon, planemaker Boeing (BA.N), opens new tab and defense and aerospace major RTX (RTX.N), opens new tab among its customers.

On an adjusted basis, the defense contractor earned $3.35 per share, compared with analysts’ estimate of $3.31 per share.

Its overall sales rose 17% during the quarter ended Dec. 29 to $5.34bn, versus analysts’ expectations of $5.29bn.

(Source: Reuters)

 

25 Jan 24. L3Harris Technologies Reports Fourth Quarter and Full-Year 2023 Results; Initiates 2024 Guidance.

* Full year (FY) 2023 orders1 of $22.8bn; book-to-bill of 1.18x

* 4Q23 revenue of $5.3bn and FY23 of $19.4bn, up 17% and 14% respectively

* 4Q23 operating margin of 2.9% and FY23 of 7.3%, reflecting goodwill impairment for pending business sale

* 4Q23 segment operating margin1 of 15.1% and FY23 of 14.8%

* 4Q23 earnings per share (EPS) of $0.83 and FY23 of $6.44; 4Q23 non-GAAP EPS1 of $3.35 and FY23 of $12.36

* FY23 cash from operations of $2.1bn, free cash flow1 of $2.0bn

L3Harris Technologies, Inc. (NYSE: LHX) reported fourth quarter and full-year 2023 results, and initiated 2024 financial guidance.

“We delivered on our 2023 financial commitments and reported record backlog of $33bn, further demonstrating that our strategy to be the industry’s Trusted Disruptor is working. Our agility and innovation continue to resonate with customers, enabling us to broaden our capabilities into high-growth markets,” said Christopher E. Kubasik, Chair and CEO. “Last year, we also closed, integrated, and are benefiting from two acquisitions and we announced the sale of a non-core business. These actions are strengthening and better aligning our portfolio with the Department of Defense and U.S. allied partner priorities.”

Kubasik continued, “We are confident on achieving the financial framework that we shared in early December at our investor day, while we execute on our 2024-2026 capital allocation priorities of reducing leverage and returning excess cash to shareholders. Entering 2024, we remain focused on driving towards the $1 bn cost savings target from our LHX NeXt program to enable operational improvements, margin expansion and free cash flow growth.”

Revenue: Fourth quarter revenue increased 17%, primarily from the acquisitions of Aerojet Rocketdyne (AR), its own reporting segment, and Tactical Data Links (TDL), reported in the Communication Systems (CS) segment. Fourth quarter revenue increases were also driven by 2% organic growth from the Space & Airborne Systems (SAS) and CS segments. Full year revenue increased 14%, primarily from the acquisitions of AR and TDL, and increased 6% on an organic1 basis primarily from growth in the SAS and CS segments.

Operating Margin: Fourth quarter operating margin decreased, primarily from the impairment associated with the pending sale of the Commercial Aviation Solutions (CAS) business within the Integrated Mission Systems (IMS) segment. Segment operating margin1 expanded 50 bps to 15.1% due to efficiencies realized by increased revenue and favorable product mix. Full year operating margin increased 70 bps. 2022 had a higher level of impairments than 2023. This improvement was partially offset by unfavorable net changes in Estimates-at-Completion (EAC). Full year segment operating margin1 decreased 60 bps to 14.8% primarily due to the factors noted above excluding the impact of impairments and other non-recurring items detailed in table 5.

Earnings Per Share (EPS): Fourth quarter EPS decreased to $0.83 driven primarily by the impairment associated with the pending sale of the CAS business, an increase in amortization of acquisition-related intangibles and higher interest expense from the funding of the AR and TDL acquisitions. Non-GAAP EPS1 increased 2% to $3.35 driven by higher segment operating income1 and a lower effective tax rate on non-GAAP income, partially offset by lower pension income and the higher interest expense. Full year EPS increased 17% to $6.44 driven primarily from lower impairments, partially offset by lower pension income and the higher interest expense. Full year Non-GAAP EPS1 decreased 4% to $12.36 driven by lower pension income and the higher interest expense, partially offset by higher segment operating income1, lower share count and a lower effective tax rate on non-GAAP income1.

Cash Flows: Fourth quarter cash from operations increased 1% primarily from less cash used to fund net working capital. Fourth quarter free cash flow1 was comparable. Full year cash from operations decreased 3% due to acquisition-related expenses, higher tax payments and higher interest, partially offset by less cash used to fund net working capital. Full year free cash flow1 was down 1%.

SEGMENT RESULTS AND GUIDANCE:

This section contains reporting segment drivers of fourth quarter and full year for revenue, operating margin, a GAAP measure, and segment operating margin1, a non-GAAP measure, which excludes unallocated items, impairments to goodwill or other assets and the gain on the sale of plant, property and equipment.

Space & Airborne Systems

Revenue: Fourth quarter revenue increased 6%, primarily from growth in Space, Mission Networks and Intel and Cyber, partially offset by a decline in legacy airborne platform volume. Full year revenue increased 7% primarily from growth in Space Systems, Mission Networks and Intel and Cyber.

Operating Margin: Fourth quarter operating margin and segment operating margin1 decreased 70 bps largely due to an increase in lower margin space revenue. Full year operating margin increased 60 bps. 2022 had a higher level of impairments. 2023 was negatively impacted by mix and net unfavorable EAC. Full year segment operating margin1 decreased 30 bps from the factors noted above, excluding impairments.

Integrated Mission Systems (IMS)

Revenue: Fourth quarter revenue decreased 6%, primarily from lower Intelligence, Surveillance and Reconnaissance (ISR) aircraft missionization efforts, partially offset by increases in CAS and Maritime. Full year revenue was flat primarily from lower ISR aircraft missionization volume, offset by higher revenue in Electro Optical, Maritime and CAS.

Operating Margin: Fourth quarter operating margin was down primarily from the impairment associated with the pending sale of the CAS business. Fourth quarter segment operating margin1 increased 150 bps from improved program performance. Full year operating margin declined 60 bps primarily due to an unfavorable net change in EACs, the sale of end-of-life inventory in the prior year and higher volume of lower-margin domestic ISR aircraft revenue, partially offset by lower impairments and research and development expenses. Full year segment operating margin1 decreased 180 bps from the factors noted above excluding impairments.

Communication Systems

Revenue: Fourth quarter revenue increased 14%, primarily from the TDL acquisition and higher volume of night-vision products. Full year revenue increased 20%, primarily from the TDL acquisition and higher volumes of legacy Broadband Communications programs, Tactical Communications and Public Safety products.

Operating Margin: Fourth quarter operating margin and segment operating margin1 increased 120 bps primarily from the acquisition of TDL and efficiencies realized from higher volume. Full year segment operating margin increased 840 bps primarily from an impairment in the prior year. Full year segment operating margin1 was comparable.

Revenue and Operating Margin: Fourth quarter and full year (5-month post acquisition period) results are attributed to program execution across missile and space programs. (Source: BUSINESS WIRE)

 

Lockheed Martin 

23 Jan 24. Lockheed forecasts dour 2024 profit on supply chain woes.

• Summary
• Companies
• Lockheed 2024 profit forecast lower than expected
• Supply chain disruptions weighing on results
• F-35 bears brunt of supply shortages
• Testing and approval of software update delays F-35 payments

Lockheed Martin (LMT.N), opens new tab forecast its 2024 profit below Wall Street expectations on Tuesday, as the U.S. defense contractor’s largest aeronautics segment that makes the F-35 jets faces supply chain disruptions.

Shares were down by about 3% in mid-day trading in New York after the company’s CEO said profits from F-35 jets could be depressed into the third quarter.

U.S. defense firms are seeing a notable increase in orders amid escalating tensions between China and the Philippines, the ongoing conflict between Russia and Ukraine, and in the Middle East. However, pandemic-related disruptions in labor and supply chains are weighing on the sector.

The company said in October its production rate was affected by low availability of processor assemblies, solid-rocket motors, castings and forgings, and its F-35 program had taken the worst hit.

Net sales from the F-35 program fell $275m in the fourth quarter from a year earlier. Final payments for some F-35s, a keystone for the Aeronautics business’ margin, have been delayed by several months because a software update on recently built jets needs final testing and approval.

During a post earnings call with analysts, CEO Jim Taiclet said these payments, expected by June 30, could continue to be delayed into the third quarter.

Some analysts have raised concerns around the risks associated with supply chain disruptions, which they fear are not likely to dissipate quickly.

DEFENSE INDUSTRY BELLWETHER

Lockheed’s earnings are seen as a bellwether for the arms sector. Rivals Northrop Grumman (NOC.N), opens new tab and General Dynamics (GD.N), opens new tab are due to report quarterly results later this week.

Advertisement · Scroll to continue

Bethesda, Maryland-based Lockheed on Tuesday forecast 2024 profits in the range of $25.65 to $26.35 per share. Analysts on average are expecting a profit of $26.62, according to LSEG data.

It also reported fourth-quarter net income of $1.87bn, down 2.4% from a year earlier. On a per share basis, however, profit rose to $7.58 from $7.40.

Sales in the company’s largest aeronautics business declined 0.3%, while total sales for the company fell 0.7% to $18.87bn in the quarter ended Dec. 31.

Revenue at its Missiles and Fire Control unit, which makes the High Mobility Artillery Rocket System (HIMARS), fell 3.5% to $3.17bn.

Capital expenditures will remain elevated in 2024, Chief Financial Officer Jay Malave told Reuters in an interview, because the company will continue to invest in building out production for weapons systems that are in high demand in Ukraine, such as the Guided Multiple Launch Rocket System (GMLRS), HIMARS and others, which the Pentagon has said would be used in the Pacific theatre, such as the Joint Air-to-Surface Standoff Missile (JASM) and Long Range Anti-Ship Missile LRASM.

Lockheed expects 2024 sales in the range of $68.50bn to $70 bn, above analysts’ average expectations of $68.66bn.

 

23 Jan 24. Lockheed Martin Reports Fourth Quarter and Full Year 2023 Financial Results

• Net sales of $18.9bn in the fourth quarter and $67.6bn in 2023
• Net earnings of $1.9bn, or $7.58 per share in the fourth quarter; $6.9bn, or $27.55 per share in 2023
• Cash from operations of $2.4 bn and free cash flow of $1.7bn in the fourth quarter; cash from operations of $7.9bn and free cash flow of $6.2bn in 2023
• $3.8bn of cash returned to shareholders through dividends and share repurchases in the fourth quarter, and $9.1bn in 2023
• Record backlog of $160.6bn
• 2024 financial outlook provided

Lockheed Martin Corporation [NYSE: LMT] today reported fourth quarter 2023 net sales of $18.9bn, compared to $19.0bn in the fourth quarter of 2022. Net earnings in the fourth quarter of 2023 and 2022 were $1.9 bn, or $7.58 and $7.40 per share, respectively. Cash from operations was $2.4bn in the fourth quarter of 2023, compared to $1.9bn in the fourth quarter of 2022. Free cash flow was $1.7bn in the fourth quarter of 2023, compared to $1.2bn in the fourth quarter of 2022.

Net sales in 2023 were $67.6bn, compared to $66.0bn in 2022. Net earnings in 2023 were $6.9bn, or $27.55 per share, compared to $5.7bn, or $21.66 per share, in 2022. Cash from operations in 2023 was $7.9bn, compared to $7.8bn in 2022. Free cash flow in 2023 was $6.2bn, compared to $6.1bn in 2022.

“Our solid finish to 2023 and full-year results reflect continued strong demand for our all-domain portfolio of advanced defense tech solutions. Backlog reached a record $160.6bn and sales increased 2 percent year-over-year to $67.6bn,” said Lockheed Martin Chairman, President and CEO Jim Taiclet. “In 2023 we invested $1.5 bn in research and development and an additional $1.7bn of capital expenditures to create, accelerate and refine the development of innovative 21st Century Security capabilities. In line with our expectations, we generated $6.2bn of free cash flow for the year, supporting strong free cash flow per share growth, and we returned over $9 bn to shareholders through dividends and share repurchases.

“Looking ahead to 2024 and beyond, our opportunities to support global security for the U.S. Government and its allies remain robust with traditional and breakthrough technologies. Our team will continue to realize the vision for 21st Century Security integrated platforms and systems, working with industry and commercial partners to pioneer and mature deterrence solutions for customers worldwide. Inside the company, our 1LMX digital transformation initiative will further materialize and drive speed, resiliency, efficiency and competitiveness across our operations. As a result, we anticipate continued top-line growth in 2024 and sustained cash flow conversion and deployment, in support of our mid-single digit growth target in free cash flow per share.”

Severance and other charges

During the fourth quarter of 2023, the company recorded charges totaling $92m ($73m, or $0.30 per share, after-tax) which include severance costs for the planned reduction of certain positions across the company and asset impairment charges. This action resulted from a review of the company’s business segments and corporate functions and is intended to improve the efficiency of the company’s operations.

Net sales and operating profit of the company’s business segments exclude intersegment sales, cost of sales, and profit as these activities are eliminated in consolidation and not included in management’s evaluation of performance of each segment. Business segment operating profit includes the company’s share of earnings or losses from equity method investees as the operating activities of the equity method investees are closely aligned with the operations of the company’s business segments.

Business segment operating profit excludes the FAS/CAS pension operating adjustment, a portion of corporate costs not considered allowable or allocable to contracts with the U.S. Government under the applicable U.S. Government cost accounting standards (CAS) or federal acquisition regulations (FAR), and other items not considered part of management’s evaluation of segment operating performance such as a portion of management and administration costs, legal fees and settlements, environmental costs, stock-based compensation expense, retiree benefits, significant severance actions, significant asset impairments, gains or losses from divestitures, intangible asset amortization expense, and other miscellaneous corporate activities. Excluded items are included in the reconciling item “Unallocated items” between operating profit from the company’s business segments and its consolidated operating profit.

Changes in net sales and operating profit generally are expressed in terms of volume. 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 period they are determined and reflect the inception-to-date effect of such changes.

The company’s consolidated net favorable profit booking rate adjustments represented approximately 23% and 21% of total segment operating profit in the quarter and year ended December 31, 2023 and 24% in both the quarter and year ended December 31, 2022.

Aeronautics 

Aeronautics’ net sales in the fourth quarter of 2023 were comparable to the same period in 2022. Net sales on the F-35 program decreased $275m due to lower volume on production contracts partially offset by higher volume on development and sustainment contracts. Net sales increased on classified programs by $180m driven by higher volume and increased on the F-16 program by $65m due to the ramp up on production.

Aeronautics’ operating profit in the fourth quarter of 2023 decreased $55m, or 7%, compared to the same period in 2022. The decrease was primarily attributable to lower operating profit of $50m on the F-35 program due to the lower cost throughput described above and lower net favorable profit adjustments on production contracts. Total net profit booking rate adjustments were $85m lower in the fourth quarter of 2023 compared to the same period in 2022.

Aeronautics’ net sales in 2023 increased $487m, or 2%, compared to 2022. Net sales increased by approximately $540m for the ramp up on classified programs and $230m on the F-16 program related to the ramp up in production. These increases were partially offset by lower net sales of $400m on the F-35 program due to lower volume on production contracts partially offset by higher volume on sustainment and development contracts.

Aeronautics’ operating profit in 2023 decreased $42m, or 1%, compared to 2022. The decrease was primarily attributable to lower operating profit of $100m on the F-22 program due to lower net favorable profit adjustments and $95m on the F-35 program due to lower net favorable profit adjustments on production contracts. These decreases were partially offset by higher operating profit of $115m on classified programs due to higher net favorable profit adjustments and the impact of the higher sales as discussed above. Total net profit booking rate adjustments were $180m lower in 2023 compared to 2022.

Missiles and Fire Control

MFC’s net sales in the fourth quarter of 2023 decreased $116m, or 4%, compared to the same period in 2022. The decrease was primarily attributable to lower net sales of approximately $150m for integrated air and missile defense programs primarily due to supplier cost timing on PAC-3, partially offset by higher net sales of approximately $60m for tactical and strike missile programs due to production ramp up on Long Range Anti-Ship Missile (LRASM) and Joint Air-to-Surface Standoff Missile (JASSM).

MFC’s operating profit in the fourth quarter of 2023 decreased $56m, or 12%, compared to the same period in 2022. The decrease was primarily attributable to lower operating profit for tactical and strike missile programs due to a $40m loss recognized on a classified program. Total net profit booking rate adjustments were $30 m lower in the fourth quarter of 2023 compared to the same period in 2022.

MFC’s net sales in 2023 decreased $64m, or 1% compared to the same period in 2022. Net sales decreased $165m for integrated air and missile defense programs due primarily to supplier cost timing on PAC-3 and $115m for sensors and global sustainment programs due primarily to the absence in 2023 of the impact of a favorable profit adjustment on an international program in 2022. These decreases were partially offset by higher net sales of $145m for tactical and strike missile programs primarily due to production ramp up on JASSM, LRASM, and precision fires programs.

MFC’s operating profit in 2023 decreased $96m, or 6%, compared to 2022. The decrease was primarily attributable to lower operating profit for tactical and strike missile programs due to $45 m of losses recognized on a classified program. Total net profit booking rate adjustments were $95m lower in 2023 compared to 2022.

Rotary and Mission Systems

RMS’ net sales in the fourth quarter of 2023 decreased $92 m, or 2%, compared to the same period in 2022. The decrease was primarily attributable to lower net sales of $115m on integrated warfare systems and sensors (IWSS) programs due to lower volume on the Multi-Mission Surface Combatant (MMSC) program and $80m for training and logistics solutions (TLS) programs due to lower volume. These decreases were partially offset by higher net sales of $140m for Sikorsky helicopter programs due to higher deliveries on international Black Hawk programs.

RMS’ operating profit in the fourth quarter of 2023 increased $12m, or 2%, compared to the same period in 2022. The increase was primarily driven by favorable contract mix across the IWSS programs portfolio. Total net profit booking rate adjustments in the fourth quarter of 2023 were comparable to the same period in 2022.

RMS’ net sales in 2023 increased $91m, or 1% compared to the same period in 2022. Higher net sales of $265m on IWSS programs due to higher volume on the Aegis program and new program ramp ups within the radar and laser systems portfolios were partially offset by lower net sales of $55 m for Sikorsky helicopter programs due to lower Black Hawk production volume.

RMS’ operating profit in 2023 decreased $41m, or 2%, compared to 2022. The decrease was primarily attributable to lower operating profit for Sikorsky helicopter programs primarily due to an unfavorable profit adjustment of $100m in the second quarter of 2023 on the Canadian Maritime Helicopter Program (CMHP) and lower Black Hawk production volume. This decrease was partially offset by higher operating profit for IWSS programs primarily due to a favorable profit adjustment of $65m in the second quarter of 2023 on an international surveillance and control program, along with higher volume on the Aegis program. Total net profit booking rate adjustments were $100 m lower in 2023 compared to 2022.

Space

Space’s net sales in the fourth quarter of 2023 increased $113m, or 3%, compared to the same period in 2022. The increase was primarily attributable to higher net sales of $155m for strategic and missile defense programs due to ramp up in the Next Generation Interceptor (NGI) development program.

Space’s operating profit in the fourth quarter of 2023 increased $73m, or 31%, compared to the same period in 2022. Total net profit booking rate adjustments across the portfolio were $90m higher in the fourth quarter of 2023 compared to the same period in 2022.

Space’s net sales in 2023 increased $1.1bn, or 9%, compared to 2022. The increase was primarily attributable to higher net sales of $620 m for strategic and missile defense programs due to ramp up in the NGI development program and higher volume in the Fleet Ballistic Missile (FBM) program; and higher net sales of $225m for national security space programs due to development ramp up on Transport Layer and classified programs.

Space’s operating profit in 2023 increased $101m, or 10%, compared to 2022. The increase was primarily attributable to higher operating profit of $140m for national security space programs due to the absence of unfavorable profit adjustments in 2023 on a ground solutions program and higher net favorable profit adjustments in classified programs. This increase was partially offset by $80m of lower equity earnings resulting from lower launch volume and an increase in new product development costs at United Launch Alliance (ULA). Total net profit booking rate adjustments were $150m higher in 2023 compared to 2022.

Total equity earnings (primarily ULA) for the quarter ended Dec. 31, 2023 were not significant, compared to approximately $15m, or 6% for the same period in 2022. Total equity earnings for the year ended Dec. 31, 2023 were $20m, or 2% of Space’s operating profit, compared to approximately $100m, or 9% in 2022.

Income Taxes

The company’s effective income tax rate was 13.0% and 14.5% for the quarter and year ended Dec. 31, 2023, compared to 12.7% and 14.2% for the quarter and year ended Dec. 31, 2022. The rates for all periods benefited from research and development tax credits, tax deductions for foreign derived intangible income, dividends paid to the company’s defined contribution plans with an employee stock ownership plan feature and employee equity awards.

 

Northrop Grumman

 

25 Jan 24. Northrop Grumman Reports Fourth Quarter and Full-Year 2023 Financial Results

• Total backlog rises to record $84.2bn driven by full year book to bill of 1.14
• Q4 Sales increase 6 percent to $10.6bn; 2023 sales increase 7 percent to $39.3bn
• Company records $1.56bn pre-tax charge associated with LRIP phase of B-21 program
• 2023 Diluted EPS of $13.53, including B-21 charge of $7.68 and MTM expense of $2.08
• 2023 Operating cash flow of $3.9bn, 2023 adjusted free cash flow1 of $2.1bn • Company introduces strong 2024 sales and margin guidance inline with prior outlook

Northrop Grumman Corporation (NYSE: NOC) reported fourth quarter 2023 sales increased 6 percent to $10.6bn, as compared with $10.0bn in the fourth quarter of 2022. Sales increased 7 percent to $39.3 bn in 2023, as compared with $36.6bn in 2022. Fourth quarter and full year 2023 sales reflect continued strong demand for our products and services. Fourth quarter 2023 net loss totaled $535m, or $3.54 per diluted share, and 2023 net earnings were $2.1bn, or $13.53 per diluted share.

Both periods include an after-tax charge on the B-21 program of $1.17bn ($7.68 per diluted share for the full year) and an after-tax mark-to-market pension and OPB (“MTM”) expense of $316 m ($2.08 per diluted share for the full year). “Our team delivered a strong finish to the year in 2023. We generated free cash flow at the high end of our guidance range, significantly exceeded our sales guidance and beat EPS consensus absent the B-21 charge we identified as a possibility this time last year,” said Kathy Warden, chair, chief executive officer and president. “With sustained global demand for our products, our 2024 guidance reflects continued strong sales and earnings growth. In addition, we’re reaffirming our cash flow outlook for 2024 and 2025, with free cash flow expected to grow at a greater than 15 percent CAGR through 2026. Northrop Grumman’s solid performance, record backlog and differentiated portfolio support our outlook for robust cash generation and our plans to return a significant amount of capital to shareholders.”

Impact to Net Earnings and EPS of B-21 Charge and MTM Expense B-21 Charge – In 2015, the U.S. Air Force awarded Northrop Grumman the B-21 contract, which includes a base contract for engineering, manufacturing, and design (EMD) and five low-rate initial production (LRIP) options. The EMD phase of the program is largely cost type and began at contract award. The LRIP options are largely fixed price and are expected to be awarded and executed through approximately the end of the decade. During the fourth quarter of 2023, the B-21 program entered flight testing and the company received an award for the first LRIP lot. We previously disclosed it was reasonably possible one or more of the LRIP options could be performed at a loss principally due to the company’s estimate of the impact macroeconomic factors may have on our cost to complete the LRIP options, as well as ongoing discussions with our suppliers and our customer. During the fourth quarter of 2023, we again reviewed our estimated profitability on the LRIP phase of the program, and we now believe it is probable each of the first five LRIP lots will be performed at a loss. The loss is largely driven by a change in our assumptions regarding funding to mitigate the impact of macroeconomic disruptions on the LRIP phase of the program and higher projected manufacturing costs that reflect recent supplier negotiations and our experience in completing the first aircraft. MTM Expense – The MTM expense relates to pension and OPB actuarial gains and losses, which the company recognizes immediately through earnings upon annual remeasurement of the assets and projected benefit obligations of our pension and OPB plans.

Sales

Fourth quarter 2023 sales increased $605m, or 6 percent, due to higher sales at Space Systems, Aeronautics Systems and Mission Systems. 2023 sales increased $2.7bn, or 7 percent, due to higher sales at all four sectors. Fourth quarter and full year sales reflect continued strong demand for our products and services.

Operating Income and Margin Rate Fourth quarter 2023 operating income decreased $1.3bn primarily due to a $1.56bn charge on the LRIP phase of the B-21 program at Aeronautics Systems, partially offset by higher operating income at the other three sectors. The decrease was also offset by $192m of lower unallocated corporate expense, largely due to higher deferred state tax benefits associated with the MTM adjustment and B-21 charge.

Fourth quarter 2023 operating margin rate declined to (3.7) percent from 9.0 percent reflecting the items above. 2023 operating income decreased $1.1bn, or 30 percent, primarily due to the B-21 charge discussed above, partially offset by higher operating income at Space Systems and Defense Systems. The decrease was also offset by $311 m of lower unallocated corporate expense, largely due to higher deferred state tax benefits associated with the MTM adjustment and B-21 charge and lower intangible asset amortization and PP&E step-up depreciation, as well as a $118m reduction in the FAS/CAS operating adjustment. 2023 operating margin rate declined to 6.5 percent from 9.8 percent reflecting the items above.

Segment Operating Income and Margin Rate

Fourth quarter 2023 segment operating income decreased $1.5bn and segment operating margin rate declined to (3.6) percent primarily due to the B-21 charge at Aeronautics Systems. Operating income at each of the other sectors was higher than in the prior year period. 2023 segment operating income decreased $1. bn, or 35 percent, and segment operating margin rate decreased to 7.0 percent primarily due to the B-21 charge at Aeronautics Systems. Operating income at Space Systems and Defense Systems was higher than in the prior year period. Federal and Foreign Income Taxes The fourth quarter 2023 effective tax rate (ETR) increased to 29.3 percent from 15.2 percent in the fourth quarter of 2022 primarily due to lower earnings before income taxes as a result of the B-21 charge and MTM expense, which collectively increased the fourth quarter 2023 ETR by 14.0 percentage points. The 2023 ETR decreased to 12.4 percent from 16.1 percent in 2022 primarily due to lower earnings before income taxes as a result of the B-21 charge and MTM expense, which collectively reduced the 2023 ETR by 3.8 percentage points.

The 2022 MTM benefit increased the 2022 ETR by 1.2 percentage points. Net Earnings Fourth quarter 2023 net loss was $535m compared to net earnings of $2.1 bn in the fourth quarter of 2022, principally due to a $1.7bn decrease in MTM (expense) benefit, the $1.3 bn decrease in operating income described above and a 243 m reduction in the non-operating FAS pension benefit, partially offset by a $594 m decrease in income tax expense.

2023 net earnings decreased $2.8bn, or 58 percent, principally due to a $1.7bn decrease in MTM (expense) benefit, a $975m reduction in the non-operating FAS pension benefit and the $1.1bn decrease in operating income described above, partially offset by a $650m decrease in income tax expense, a $107m increase in returns on marketable securities related to our non-qualified benefit plans, and a $97m gain recognized upon the sale of our minority investment in an Australian business. Cash Flows Fourth quarter 2023 net cash provided by operating activities increased $179m, or 8 percent, principally due to improved trade working capital.

Fourth quarter 2023 adjusted free cash flow decreased $47m, or 3 percent, principally due to higher capital expenditures, partially offset by an increase in net cash provided by operating activities. 2023 cash provided by operating activities increased $974m, or 34 percent, principally due to improved trade working capital largely driven by increased billings and cash collections, partially offset by higher supplier payments. 2023 adjusted free cash flow increased $479m, or 30 percent, principally due to higher net cash provided by operating activities, partially offset by an increase in capital expenditures.

Awards and Backlog

Fourth quarter and year to date 2023 net awards totaled $10.9bn and $44.8bn, respectively, and backlog totaled $84.2bn. Significant fourth quarter new awards include $3.5bn for restricted programs (primarily at Aeronautics Systems, Space Systems and Mission Systems), $1.2bn for F-35 programs (primarily at Mission Systems and Aeronautics Systems), $1.2bn for Triton, $0.7bn for Space Development Agency (SDA) Tranche 2 Transport Layer, and $0.3bn for B-2. Significant 2023 new awards include $15.5bn for restricted programs (primarily at Space Systems, Aeronautics Systems and Mission Systems), $2.1 bn for F-35 programs (primarily at Aeronautics Systems and Mission Systems), $1.7bn for E-2, $1.5bn for Triton, $1.4bn for SDA Tranche 2 Transport Layer, and $0.8bn for Guided Multiple Launch Rocket System (GMLRS). Segment Operating Results

AERONAUTICS SYSTEMS

Sales

Fourth quarter 2023 sales increased $153m, or 6 percent, primarily due to higher volume on restricted programs as well as the Triton and E-2 programs, partially offset by a decrease in production volume on the F-35 program and lower volume on the F/A-18 program largely due to post Multi-Year Procurement 4 (MYP4) contract award timing. 2023 sales increased $255m, or 2 percent, primarily due to higher volume on restricted programs, partially offset by a $191m decrease on the F/A-18 program largely due to post MYP4 contract award timing, a $131m decrease on the Joint Surveillance and Target Attack Radar System (JSTARS) program as that program nears completion, and a decrease on the E-2 program largely related to higher material volume in the prior year. Operating Income

Fourth quarter 2023 operating income decreased $1.6bn and operating margin rate decreased to (43.7) percent primarily due to the previously described $1.56bn charge recorded on the LRIP phase of the B-21 program, inclusive of a $143m unfavorable EAC adjustment for the first LRIP lot. The prior year period includes a $66 m favorable EAC adjustment on the engineering, manufacturing and development (EMD) phase of the B-21 program. Apart from these B-21 EAC adjustments, net EAC adjustments across the sector were $39m higher than in the prior year period. 2023 operating income decreased $1.6bn and operating margin rate decreased to (4.4) percent primarily due to the B-21 charge and related unfavorable EAC adjustment on the LRIP phase of the program described above. The prior year period includes $133m of favorable EAC adjustments on the EMD phase of the B-21 program and a $38m gain on a property sale. Apart from the B-21 EAC adjustments noted above, net EAC adjustments across the sector were $58m higher than in the prior year.

DEFENSE SYSTEMS

Sales

Fourth quarter 2023 sales decreased $12m, or 1 percent, primarily due to a decrease on the Integrated Air and Missile Defense Battle Command System (IBCS) largely driven by the timing of material receipts in the prior year, partially offset by higher sales on GMLRS. 2023 sales increased $283m, or 5 percent, primarily due to higher volume on several programs, including ammunition programs, GMLRS, an international training program, Hypersonic Attack Cruise Missile (HACM), and Stand-in Attack Weapon (SiAW). Operating Income Fourth quarter 2023 operating income increased $19m, or 10 percent, primarily due to a higher operating margin rate. Operating margin rate increased to 12.3 percent from 11.0 percent primarily due to higher net EAC adjustments. 2023 operating income increased $46m, or 7 percent, due to higher sales and a higher operating margin rate. Operating margin rate increased to 12.1 percent from 11.9 percent primarily due to the write-down of an unconsolidated joint venture investment in the prior year.

MISSION SYSTEMS

Sales

Fourth quarter 2023 sales increased $136m, or 5 percent, primarily due to higher restricted sales on advanced microelectronics programs as well as higher volume on marine systems programs, partially offset by lower volume on airborne radar programs.

2023 sales increased $499m, or 5 percent, primarily due to higher restricted sales on advanced microelectronics programs, as well as a $165m increase on marine systems programs. These increases were partially offset by a $107m decrease on the Ground/Air Task Oriented Radar (G/ATOR) program largely driven by the timing of material receipts and fullrate production (FRP) 5 contract award, as well as lower volume on airborne radar programs. Operating Income Fourth quarter 2023 operating income increased $10m, or 2 percent, due to higher sales, partially offset by a lower operating margin rate. Operating margin rate decreased to 15.1 percent from 15.4 percent primarily due to lower net EAC adjustments. 2023 operating income decreased $9m, or 1 percent, due to a lower operating margin rate, which more than offset higher sales. Operating margin rate decreased to 14.8 percent from 15.6 percent primarily due to a prior year $33m benefit recognized in connection with a contract-related legal matter, as well as changes in contract mix toward more cost-type content. SPACE SYSTEMS

Sales

Fourth quarter 2023 sales increased $324m, or 10 percent, primarily due to higher volume on restricted programs and ramp-up on development programs, including a $100m increase on the Space Development Agency (SDA) Tranche 2 Transport Layer program and higher volume on the Next-Generation Overhead Persistent Infrared Polar (NextGen Polar) program. 2023 sales increased $1.7 bn, or 14 percent, primarily due to higher volume on restricted programs and ramp-up on development programs, including increases of $426m on the Ground Based Strategic Deterrent (GBSD) program, $333m on the NextGen Polar program, $219 m on the Next Generation Interceptor (NGI) program, $119m on the SDA Tranche 1 Tracking Layer program and $102m on the SDA Tranche 2 Transport Layer program. These increases were partially offset by a $172m decrease for Commercial Resupply Services (CRS) missions and a $109m decrease on the Habitation and Logistics Outpost (HALO) program. Operating Income Fourth quarter 2023 operating income increased $7m, or 2 percent, due to higher sales, partially offset by a lower operating margin rate, which decreased to 8.4 percent from 9.1 percent. During the fourth quarter of 2023, we recorded a $42m unfavorable EAC adjustment on the HALO program largely due to cost growth stemming from evolving Lunar Gateway architecture and mission requirements combined with macroeconomic challenges. Apart from the HALO program, net EAC adjustments across the sector were $58m higher than in the prior year period. Fourth quarter 2023 operating margin also includes a $26m benefit from insurance recoveries in our commercial space business, partially offset by a $25m write-down of commercial inventory. The prior year period includes a $96m gain recognized in connection with a land exchange transaction and a $45m write-down of commercial inventory. 2023 operating income increased $54m, or 5 percent, due to higher sales, partially offset by a lower operating margin rate. Operating margin rate decreased to 8.7 percent from 9.4 percent primarily due to the prior year $96m gain recognized in connection with a land exchange transaction, as well as lower net EAC adjustments driven by $100m of unfavorable EAC adjustments on the HALO program in 2023. These decreases were partially offset by a $42m benefit from insurance recoveries in our commercial space business during 2023.

 

RTX

 

23 Jan 24. RTX beats estimates on aviation strength, defense demand. A recovery in commercial air traffic and increased global defense spending helped RTX (RTX.N), opens new tab report better-than-expected fourth-quarter earnings on Tuesday, boosting margins in its aftermarket service and defense business lines.

RTX shares were up 6.5% in early trading in New York.

The defense and aerospace major also forecast 2024 profit in the range of $5.25 to $5.40 per adjusted share, while analysts estimate $5.28 per share, according to LSEG data.

RTX capitalized on a strong aftermarket business as airlines extend the use of their planes to meet strengthened travel demand and amid a shortage of new jets.

Pratt and Whitney, an RTX subsidiary, booked a 25% jump in operating profit in the reported quarter, amid an ongoing inspection drive to check for potentially flawed components in its geared turbofan jet engines.

The issue relates to a powder metal used in engine parts, such as high pressure turbine disks and high-pressure compressor disks, that could result in micro-cracks and fatigue.

Chief Financial Officer Neil Mitchill told Reuters in an interview the company’s negotiations with customers were progressing and “we’re closing those agreements in line with the financial and operational assumptions that we have made.”

Financial assumptions about the GTF issue were unchanged from guidance issued in October. RTX still expects about 350 aircraft to be grounded at any time due to engine removals, but peak groundings in early 2024 are projected to be lower than the original estimate of 650 aircraft, executives said.

The company is also working with GTF maintenance providers on “light and medium work scopes” that can decrease repair time.

RTX’s defense arm Raytheon, led by retiring Wes Kremer, reported a 14% rise in operating profit, helped by AMRAAM rockets and Patriot systems, key weapons used by Ukraine to repel Russia’s invasion.

U.S. defense companies are getting more contracts as the Russia-Ukraine war, the need to support allies in the Middle East and the specter of Chinese aggression drive up demand, even as growth is hindered by pandemic-related labor and supply-chain disruptions.

Experts expect a boost in the order backlog of RTX along with other major companies that receive government contracts, such as Lockheed (LMT.N), opens new tab, General Dynamics (GD.N), opens new tab and Northrop Grumman (NOC.N), opens new tab, following the passage of the $886bn U.S. defense policy bill.

RTX reported adjusted net income of $1.29 per share in the fourth quarter, ahead of analysts’ estimate of $1.24 per share. Sales came in at $19.93bn, beating Street expectation of $19.7bn, as per LSEG data.

However, the company forecast 2024 revenue below expectations, owing to lingering supply challenges in the global aerospace industry.

It expects revenue between $78bn and $79bn, against analysts’ average expectation of $79.67 bn. (Source: Google/Reuters)

 

23 Jan 24. RTX Reports 2023 Results and Announces 2024 Outlook.

RTX delivers 10% sales growth in Q4 and exceeds full year cash flow expectations; expects continued sales and earnings growth in 2024

RTX (NYSE: RTX) reported fourth quarter 2023 results and announces 2024 outlook.

Fourth quarter 2023

• Reported sales of $19.9bn, up 10 percent versus prior year
• Adjusted sales* of $19.8bn, up 10 percent versus prior year
• GAAP EPS from continuing operations of $1.05 included $0.29 of acquisition accounting adjustments and a $0.05 benefit from restructuring and net significant and/or non-recurring items
• Adjusted EPS* of $1.29, up 2 percent versus prior year
• Operating cash flow from continuing operations of $4.7bn; Free cash flow* of $3.9bn
• Company backlog of $196bn; including $118bn of commercial and $78bn of defense
• Repurchased $10.3bn of RTX shares

Full year 2023

• Reported sales of $68.9bn, up 3 percent versus prior year, reflecting the impact of the previously disclosed Pratt powder metal matter
• Adjusted sales* of $74.3bn, up 11 percent versus prior year
• GAAP EPS of $2.23, down 36 percent versus the prior year, reflecting the impact of the previously disclosed Pratt powder metal matter
• Adjusted EPS* of $5.06, up 6 percent versus the prior year
• Operating cash flow from continuing operations of $7.9bn; Free cash flow* of $5.5bn
• Achieved approximately $295m of incremental RTX gross synergies
• Repurchased $12.9 bn of RTX shares

Outlook for full year 2024

• Sales of $78.0 – $79.0 bn
• Adjusted EPS* of $5.25 – $5.40
• Free cash flow* of approximately $5.7bn

2025 RTX financial commitments

• Updates 2020 to 2025 adjusted annual sales* growth to 5.5 to 6.0 percent1, down from 6.0 to 7.0 percent
• Updates 2020 to 2025 adjusted segment margin* expansion to 500 to 550 basis points1, down from 550 to 650 basis points
• Reaffirms 2025 free cash flow* commitment of $7.5bn
• Reaffirms 2025 capital return commitment of $36 to $37bn through 2025

“RTX reported solid full-year results, delivering 11 percent organic sales* growth and $5.5 bn in free cash flow* for the year, exceeding our expectations” said RTX Chairman and CEO Greg Hayes. “Across our portfolio, we supported the continued recovery in commercial aerospace and provided critical platforms and advanced technologies to our customers, achieving $95 bn in new awards and ending the year with a record backlog of $196 bn. I am extremely proud of what RTX has been able to accomplish, and I’m even more excited to see the innovations that RTX will deliver in the future.”

“RTX is beginning 2024 with strong momentum and we are projecting another year of strong sales growth and continued segment margin expansion,” said RTX President and COO Chris Calio. “The financial and operational outlook of our GTF fleet management plans remain consistent from October and continues to be a top priority as we focus on driving performance across all three businesses to support our customers and deliver shareowner value. With the execution of our $10bn accelerated share repurchase program, we’ve delivered over $29 bn to shareowners since the merger, achieving significant progress toward our capital return commitment of between $36 – $37bn through 2025.”

Fourth quarter 2023

RTX reported fourth quarter sales of $19.9bn, up 10 percent over the prior year, which included a benefit of $0.1bn related to a customer settlement. On an adjusted basis, sales* were $19.8bn, up 10 percent over the prior year. GAAP EPS from continuing operations of $1.05 was up 9 percent versus the prior year, and included $0.29 of acquisition accounting adjustments, a $0.06 benefit related to a customer settlement and $0.01 of restructuring and other net significant and/or non-recurring charges. Adjusted EPS* of $1.29 was up 2 percent versus the prior year.

The company recorded net income from continuing operations attributable to common shareowners in the fourth quarter of $1.4bn which included $394m of acquisition accounting adjustments, a benefit of $87m related to a customer settlement and $20m of restructuring and other net significant and/or non-recurring charges. Adjusted net income* was $1.8bn, down 6 percent versus prior year as adjusted segment operating profit* growth was more than offset by higher interest expense and tax expense, and lower non-operating pension income. Operating cash flow from continuing operations in the fourth quarter was $4.7bn. Capital expenditures were $805m, resulting in free cash flow* of $3.9bn.

Backlog and Bookings

Backlog at the end of the fourth quarter was $196 bn, of which $118 bn was from commercial aerospace and $78 bn was from defense.

Notable defense bookings during the quarter included:

• $2.8bn for GEM-T production at Raytheon
• $1.3bn of classified bookings at Raytheon
• $838m for F135 sustainment at Pratt & Whitney
• $443m for F119 sustainment at Pratt & Whitney
• $408m for HACM development at Raytheon
• $355m for F100 sustainment at Pratt & Whitney
• $343m for StormBreaker production at Raytheon
• $321m for Silent Knight production at Raytheon

Segment Results

The company’s reportable segments are Collins Aerospace, Pratt & Whitney, and Raytheon.

Collins Aerospace

Collins Aerospace had fourth quarter 2023 reported sales of $7,120m, up 14 percent versus the prior year. Reported sales benefited from a customer settlement. The remaining increase in sales was driven by a 23 percent increase in commercial aftermarket, a 17 percent increase in commercial OE, and a 1 percent increase in military. The increase in commercial sales was driven primarily by strong demand across commercial aerospace end markets, which resulted in higher flight hours and higher OE production rates. The increase in military sales was driven primarily by the timing of deliveries. On an adjusted basis, sales* were up 12 percent versus the prior year.

Collins Aerospace recorded operating profit of $1,126m, up 34 percent versus the prior year. The increase in operating profit was primarily driven by drop through on higher commercial aftermarket volume and favorable mix, partially offset by lower commercial OE as drop through on volume was more than offset by higher production costs. Higher R&D expenses were offset by lower SG&A. Reported operating profit included a $112m benefit from a customer settlement. On an adjusted basis, operating profit* of $1,035m was up 22 percent versus the prior year.

Pratt & Whitney

Pratt & Whitney had fourth quarter 2023 reported sales of $6,439m, up 14 percent versus the prior year. The increase in sales was driven by a 20 percent increase in commercial OE, an 18 percent increase in commercial aftermarket, and a 4 percent increase in military sales. The increase in commercial sales was primarily due to higher aftermarket volume, higher OE volume and favorable mix. The increase in military sales was driven by higher sustainment volume partially offset by lower material inputs on production programs.

Pratt & Whitney recorded operating profit of $382 m, up 25 percent versus the prior year. The increase in operating profit was primarily driven by drop through on higher commercial aftermarket volume and favorable commercial OE mix. This was partially offset by higher commercial OE volume, higher production costs, an unfavorable military contract adjustment, and the absence of a benefit from a prior year customer contract adjustment. Higher R&D expenses were offset by lower SG&A. On an adjusted basis, operating profit* of $405 m was up 26 percent versus the prior year.

Raytheon

Raytheon had fourth quarter 2023 reported sales of $6,886m, up 3 percent versus prior year. The increase in sales was primarily driven by higher volume on advanced technology and air power programs.

Raytheon recorded operating profit of $604m, up 14 percent versus the prior year. The increase in operating profit was driven primarily by higher volume and lower operating expenses, partially offset by unfavorable net program efficiencies. The prior year operating profit also included a charge of $42 m related to a divestiture. On an adjusted basis, operating profit* of $618 m was up 8 percent versus the prior year.

 

24 Jan 24. Textron Reports Fourth Quarter 2023 Results; Announces 2024 Financial Outlook.

• EPS of $1.01; adjusted EPS of $1.60, up 30% from a year ago
• Full-year adjusted EPS of $5.59, up from $4.45 in 2022
• Full-year share repurchases $1.168bn
• Aviation backlog of $7.2bn at year-end 2023, up $782m from year-end 2022
• 2024 full-year EPS outlook of $5.62 to $5.82, full year adjusted EPS outlook of $6.20 to $6.40

Textron Inc. (NYSE: TXT) today reported fourth quarter 2023 income from continuing operations of $1.01 per share, as compared to $1.07 per share in the fourth quarter of 2022. Adjusted income from continuing operations, a non-GAAP measure that is defined and reconciled to GAAP in an attachment to this release, was $1.60 per share for the fourth quarter of 2023, compared to $1.23 per share in the fourth quarter of 2022.

Full year 2023 income from continuing operations was $4.57 per share, up from $4.01 in 2022. Full year 2023 adjusted income from continuing operations was $5.59, as compared to $4.45 in 2022.

“2023 was a strong year at Textron with solid revenue and profit growth along with segment profit margin expansion,” said Textron Chairman and CEO Scott C. Donnelly. “At Aviation, we saw continued backlog growth and, at Bell, the team began executing on our transformational FLRAA program.”

Cash Flow

Net cash provided by operating activities of the manufacturing group for the full year was $1.3 bn. Manufacturing cash flow before pension contributions, a non-GAAP measure that is defined and reconciled to GAAP in an attachment to this release, totaled $931 m for the full year, down from $1.178bn in 2022.

In the quarter, Textron returned $283m to shareholders through share repurchases. Full year 2023 share repurchases totaled $1.168 bn.

Outlook

Textron is forecasting 2024 revenues of approximately $14.6bn, up from $13.7bn in 2023. Textron expects full-year 2024 GAAP earnings per share from continuing operations will be in the range of $5.62 to $5.82 or $6.20 to $6.40 on an adjusted basis, which is reconciled to GAAP in an attachment to this release.

The company is estimating net cash provided by operating activities of the manufacturing group will be between $1.3bn and $1.4bn and manufacturing cash flow before pension contributions, a non-GAAP measure, will be between $900m and $1.0bn, with planned pension contributions of about $50 m.

“The 2024 outlook reflects higher revenues, increasing segment profit and operating margin expansion with a continuation of our growth strategy of ongoing investments in new products and programs to drive increases in long-term shareholder value,” Donnelly concluded.

Fourth Quarter Segment Results

Textron Aviation

Revenues at Textron Aviation of $1.5bn were down $58m from the fourth quarter of 2022, reflecting lower volume and mix of $158m, partially offset by higher pricing of $100m.

Textron Aviation delivered 50 jets in the quarter, down from 52 last year, and 44 commercial turboprops, down from 47 last year.

Segment profit was $193m in the fourth quarter, up $23m from a year ago, reflecting a favorable impact from pricing, net of inflation, of $51m, partially offset by lower volume and mix of $22 m.

Textron Aviation backlog at the end of the fourth quarter was $7.2 bn.

Bell

Bell revenues were $1.1bn, up $255 m from last year’s fourth quarter, reflecting higher commercial revenues of $171m largely driven by increased deliveries and higher military revenues of $84m related to the FLRAA program.

Bell delivered 91 commercial helicopters in the quarter, up from 71 last year.

Segment profit of $118m was up $55m from a year ago, primarily driven by higher volume and mix of $39 m.

Bell backlog at the end of the fourth quarter was $4.8bn.

Textron Systems

Revenues at Textron Systems were $314m, flat with last year’s fourth quarter.

Segment profit of $35 m was equal to last year’s fourth quarter.

Textron Systems’ backlog at the end of the fourth quarter was $2.0bn.

Industrial

Industrial revenues were $961m, up $54m from last year’s fourth quarter, largely reflecting higher volume and mix at Kautex and a favorable impact from pricing at Textron Specialized Vehicles.

Segment profit of $57m was up $14m from the fourth quarter of 2022, primarily due to higher pricing, net of inflation, of $18m.

Textron eAviation

Textron eAviation segment revenues were $10m and segment loss was $23m in the fourth quarter of 2023, which reflected the operating results of Pipistrel along with research and development costs for initiatives related to the development of sustainable aviation solutions.

Finance

Finance segment revenues were $12m, and profit was $4m in the fourth quarter of 2023.

Restructuring

In November, we announced a restructuring plan that resulted in pre-tax special charges of $126m in the fourth quarter. We anticipate the restructuring plan will be substantially completed in the first half of 2024, resulting in annualized cost savings of approximately $75m.

(Source: BUSINESS WIRE)