29 Jul 21. As the markets begin to reopen after the pandemic, the US Majors reported strong results.
28 Jul 21. Boeing turns first profit in almost 2 years, shares jump 5%. Boeing Co (BA.N) on Wednesday posted its first quarterly profit in almost two years as revived domestic travel fueled 737 MAX deliveries, and shares rose 5% despite festering U.S.-China relations and depressed long-haul travel. The 737 MAX is integral to Boeing’s financial recovery. The U.S. planemaker is scrambling to recoup bns of dollars in lost sales from the pandemic andmove beyond the safety scandal caused by two fatal 737 MAX crashes. It also must deal with structural defects of its bigger, more profitable 787 planes. Higher defense and services sales boosted results and Boeing still expects to turn cash flow positive in 2022. Shares were up roughly 5% at $234 in afternoon trading even as the Dow Jones Industrial Average (.DJI) dipped.
Chief Executive Officer David Calhoun told employees in a message that Boeing plans maintain stable staffing with a workforce of around 140,000. Previously the company had targeted a reduction to 130,000 by the end of 2021.
Calhoun told investors on a conference call, “The U.S. domestic market is showing remarkable recovery” but cautioned that international travel could take longer to pick up. He added that Boeing was worried about COVID-19 variants and a labor shortage in its sprawling supply chain. “We anticipate a multi-year recovery,” Calhoun said.
Boeing’s 737 MAX remains grounded in China, where trade tensions between Washington and Beijing have stunted sales. Calhoun said he still expects the 737 MAX to win approval before year-end.
“Hopefully bigger trade issues don’t get in the way,” Calhoun added.
Before the 737 MAX was grounded in March 2019, Boeing sold a quarter of the planes it built annually to China buyers. For years, simmering geopolitical tensions between Washington and Beijing have caused uncertainty. Boeing also faces tougher regulatory scrutiny and weak demand for its delayed 777X mini-jumbo, and months of costly repairs and forensic inspections to fix production-related defects on its 787 program. Boeing reiterated plans to cut 787 production to an unspecified rate lower than five jets per month after finding a new problem, first reported by Reuters, and to deliver fewer than half of the lingering 100 or so 787 Dreamliners in its inventory this year – instead of the “vast majority” it had expected.
“Good news, the inspections are done, toe to tail,” Calhoun said. “The underlying causes are getting understood and resolved.”
Calhoun added that Boeing may need to rethink its plan for production rate increases if the 737 MAX is not approved in China by year-end. Boeing said it has delivered more than 130 737 MAXs since a safety ban on that jet was lifted in November 2020, and that it was building 16 737 MAX jets per month at its Seattle-area factory. It aims to increase output to 31 per month by early 2022.
“Defense markets are strong and they’re successfully conserving cash,” said Teal Group analyst Richard Aboulafia. “Much depends on the angle of the commercial recovery.”
Looking to build momentum, Boeing is preparing to launch its delayed CST-100 Starliner astronaut capsule to the International Space Station on Friday in a crucial do-over test following a near “catastrophic failure” during its 2019 debut.
Calhoun said he is “optimistic, confident” about Friday’s launch after software flaws and NASA reviews sidelined its Starliner for 18 months, and about Boeing’s ability to compete against newer space players such as bnaire entrepreneur Elon Musk’s SpaceX and Jeff Bezos’ Blue Origin.
Boeing’s core operating profit was $755m in the second quarter, compared with a loss of $3.32bn a year earlier. Revenue rose 44% to about $17bn. Analysts had on average expected Boeing to report a quarterly loss of $454.8m on revenue of $16.54bn, IBES data from Refinitiv showed. Boeing’s commercial airplanes division, its traditional profit powerhouse, reported a quarterly loss of $472m, but its defense business earned $958m and its services division took in $531m. (Source: Reuters)
28 Jul 21. General Dynamics profit beats on higher sales, raises guidance. General Dynamics Corp (GD.N) beat Wall Street estimates for quarterly profit on Wednesday as the defense contractor benefited from higher sales in its combat systems and technologies divisions. Its shares rose 2.9% in early trading before settling back down. The second-quarter earnings report comes a year after the global pandemic first hit the aerospace and defense industry supply chain, causing shutdowns, shortages and months of delays that continue to affect the unit that makes Gulfstream business jets. Gulfstream delivered 21 jets versus 32 a year ago, but the company said it saw “very strong” customer demand as the pandemic continues and plans to deliver 71 more jets by year end. Company revenue fell marginally to $9.22 bn, below analyst estimates of $9.30 bn as revenue in the aerospace unit was down 17.8% from the same period a year ago. The company raised its full-year earnings per share guidance by $0.45 to $0.50 cents to about $11.50. Fresh support for the defense side of the business came last week when the U.S. Senate’s Armed Services Committee rolled out a draft of its 2022 defense budget that boosted spending by $25bn, potentially benefiting defense companies including General Dynamics, and signaling defense spending could rise under President Joe Biden. The panel wanted more spending on ships that could add to General Dynamics’ backlog – which at the end of the second quarter stood at $89.2 bn, the company said. Sales in the company’s combat systems unit, which makes battle tanks, rose 8.3% to $1.90bn, while the technologies unit, which provides IT and mission-support services, saw an increase of 3.2% in sales to $3.16bn. Net earnings rose to $737m, or $2.61 per share, in the quarter ended July 4, from $625m, or $2.18 per share, a year earlier. Analysts on average expected the company to earn $2.55 per share, according to Refinitiv data. (Source: Reuters)
26 Jul 21. Lockheed second quarter profit misses even as space business boosts sales. U.S. weapons maker Lockheed Martin Corp (LMT.N) said on Monday its space business boosted revenues in the latest quarter, but a classified aeronautics development program caused the company to miss analysts’ profit estimate, sending shares down 3.2% in early trading. Lockheed’s second-quarter earnings report comes a year after the global pandemic first hit the defense industry and its supply chain, causing shutdowns, shortages and months of delays. Fresh support for the industry came last week when the Democrat-controlled U.S. Senate’s Armed Services Committee rolled out a draft of its 2022 defense budget which boosted spending by $25bn, potentially benefiting defense companies including Lockheed Martin, and signaling defense spending could rise under President Joe Biden. Lockheed increased its guidance for full-year earnings per share. Quarterly sales at Lockheed’s largest unit, aeronautics – which makes the F-35 fighter jet, rose 2.5% to $6.6bn. But “performance issues” at aeronautics in the quarter led to a loss of $225m on “a highly classified program that Lockheed Martin has been working on for a couple of years,” Ken Possenriede, Lockheed’s chief financial officer, said in a telephone interview. Lockheed posted $6.52 in earnings per diluted share for the quarter. Without the $225m loss, earning per share would have been $0.61 cents higher, according to the results. Analysts on average expected the company to report quarterly earnings of $6.53 per share, according to Refinitiv data. In its sales outlook for the year, Lockheed trimmed the aeronautics segment by $175m, but increased its outlook for sales by the same figure across the Rotary and Mission Systems unit and Space unit. The space unit saw its profits in the quarter increase to $335m, a jump of 33%, due to progress on space based sensor platforms and its United Launch Alliance investment. Lockheed’s second-quarter revenue was $17bn. Analysts had estimated a revenue of $16.9bn, according to Refinitiv data. (Source: Reuters)
29 Jul 21. Northrop lifts outlook as countries ramp up space exploration. Defense contractor Northrop Grumman Corp (NOC.N) raised its full-year forecast on Thursday and beat quarterly estimates, propped up by high demand at its fast-growing space unit. The company’s space systems unit reported a 34% jump in quarterly sales, as countries ramp up investment in space exploration and satellite based sensors. Earlier this month, Northrop won a contract worth $935m to develop living quarters for NASA’s planned outpost in the lunar orbit. r Fresh support for the defense industry came last week when the Democrat-controlled U.S. Senate’s Armed Services Committee rolled out a draft of its 2022 defense budget which boosted spending by $25bn, potentially benefiting defense companies including Northrop, and signaling defense spending could rise under President Joe Biden. The United States is modernizing its military in an effort to deter Russia and China, which is likely to boost the company’s balance sheet. Analysts say Northrop’s B-21 bomber and GBSD intercontinental ballistic missiles are likely to be the backbone for the company’s growth over the next decade. Northrop now expects full-year adjusted earnings per share between $24.40 and $24.80, up from its prior range of $24 and $24.50. The Virginia-based company expects full-year sales to be between $35.8bn and $36.2bn, above its previous forecast of $35.3bn and $35.7bn. Adjusted net earnings of $6.42 per share beat analysts’ estimate of $5.84 in the second quarter ended June 30. Total sales of $9.15bn also toppled estimates, according to IBES data from Refinitiv. (Source: Reuters)
27 Jul 21. Raytheon raises 2021 profit forecast on commercial aerospace strength. U.S. aerospace manufacturer Raytheon Technologies Corp (RTX.N) on Tuesday raised its full-year profit forecast and beat quarterly expectations on the back of higher demand for its commercial engines, spare parts and aftermarket services.
Shares of the company, which posted a rise in revenue in all four of its units, were up more than 3.5% in early trading.
As demand for travel returned quicker than expected, airlines have rushed to return planes to skies and recall crews, boosting revenue at its Collins Aerospace and Pratt & Whitney units by 6% and 19%, respectively, on an adjusted basis.
“What really happened in the second quarter is airlines aggressively got back into the business of making sure their fleets were ready for this summer travel season,” Neil Mitchill, Raytheon’s chief financial officer, told Reuters.
However, the recovery could be thwarted by the highly transmissible COVID-19 Delta variant that has led to a rise in cases in several countries, with the United States planning to keep existing travel restrictions despite months of lobbying by airlines. read more
“The better than expected result at Collins bodes well at this early stage of the aviation recovery,” Vertical Research Partners analyst Robert Stallard said in a note.
Raytheon now expects full-year earnings of $3.85 and $4.00 per share, above its previous forecast of $3.50 and $3.70.
The Waltham, Massachusetts-based company also raised the lower end of its fiscal year revenue forecast to $64.4bn from $63.9bn. The upper end of the outlook remains at $65.4bn.
On an adjusted basis, it earned $1.03 per share in the second quarter ended June 30, beating analysts’ estimate for a profit of 93 cents per share. Net sales rose 13% to $15.88bn and also topped estimates.
(Source: Reuters)
29 Jul 21. Textron lifts 2021 profit forecast again on business jet strength. Textron Inc (TXT.N) on Thursday beat Wall Street estimates for quarterly profit and raised its full-year adjusted profit forecast for the second time this year, on higher demand for private aircraft. Business jet traffic has rebounded from COVID-19 pandemic lows more quickly than commercial flights in the United States, helped by wealthy leisure travelers and some would-be first time flyers avoiding airlines. Textron expects to get back to production levels similar to 2019 by 2022. General Dynamics Corp (GD.N) said on Wednesday it would make more of its Gulfstream jets.
While Textron Chief Executive Scott Donnelly told analysts the higher demand “seems to be quite sustainable”, the maker of Cessna business jets is facing labor and supply chain challenges as factories struggle to meet surging orders.
“While we’ve experienced continued strong retail demand for our products, we have been impacted by our supply chain’s ability to fully meet this demand, and we continue to work through these production challenges,” Donnelly said.
He said Textron is bringing workers back to support growing production but echoed critics in suggesting hiring was a challenge due to expanded U.S. unemployment benefits.
“I think hiring will get easier as the year goes on, we get off some of these unemployment programs that are frankly, creating huge disincentives for people not to work,” Donnelly said.
The company said it expects 2021 adjusted earnings of $3.00 to $3.20 per share, compared to its previous forecast of $2.80 to $3. Textron’s aviation unit delivered 44 jets, higher than the 23 a year earlier, and 33 commercial turboprops, up from 15 in 2020. Sales in its aviation unit rose 55.4% to $1.16bn in the second quarter. Excluding items, the company earned 81 cents per share, above analyst estimates of 65 cents, according to Refinitiv data. Revenue rose 29% to $3.19 billion, above analysts’ average estimate of $2.97bn, according to Refinitv data. Textron shares were indicated 1.3% at $70 ahead of opening. (Source: Reuters)
Boeing
General Dynamics
Honeywell
Lockheed Martin
Northrop Grumman
Raytheon
Textron
Boeing
28 Jul 21. Boeing Reports Second-Quarter Results
- Continued progress on global safe return to service of 737 MAX
- Revenue of $17.0 bn, GAAP earnings per share of $1.00 and core (non-GAAP)* earnings per share of $0.40
- Operating cash flow of ($0.5)bn; cash and marketable securities of $21.3bn
- Commercial Airplanes backlog grew to $285 bn and added 180 net orders
| Table 1. Summary Financial Results | Second Quarter | First Half | ||||||||||
| (Dollars in Ms, except per share data) | 2021 | 2020 | Change | 2021 | 2020 | Change | ||||||
| Revenues | $16,998 | $11,807 | 44% | $32,215 | $28,715 | 12% | ||||||
| GAAP | ||||||||||||
| Earnings/(Loss) From Operations | $1,023 | ($2,964) | NM | $940 | ($4,317) | NM | ||||||
| Operating Margin | 6.0% | (25.1)% | NM | 2.9% | (15.0)% | NM | ||||||
| Net Earnings/(Loss) | $567 | ($2,395) | NM | $6 | ($3,036) | NM | ||||||
| Earnings/(Loss) Per Share | $1.00 | ($4.20) | NM | $0.09 | ($5.31) | NM | ||||||
| Operating Cash Flow | ($483) | ($5,280) | NM | ($3,870) | ($9,582) | NM | ||||||
| Non-GAAP* | ||||||||||||
| Core Operating Earnings/(Loss) | $755 | ($3,319) | NM | $402 | ($5,019) | NM | ||||||
| Core Operating Margin | 4.4% | (28.1)% | NM | 1.2% | (17.5)% | NM | ||||||
| Core Earnings/(Loss) Per Share | $0.40 | ($4.79) | NM | ($1.12) | ($6.49) | NM | ||||||
| *Non-GAAP measure; complete definitions of Boeing’s non-GAAP measures are on page 6, “Non-GAAP Measures Disclosures.” | ||||||||||||
The Boeing Company [NYSE: BA] reported second-quarter revenue of $17.0bn, driven by higher commercial airplanes and services volume. GAAP earnings per share of $1.00 and core earnings per share (non-GAAP)* of $0.40 primarily reflects higher commercial volume and lower period costs (Table 1). Boeing recorded operating cash flow of ($0.5) bn.
“We continued to make important progress in the second quarter as we focus on driving stability across our operations and transforming our business for the future,” said Boeing President and Chief Executive Officer David Calhoun. “While our commercial market environment is improving, we’re closely monitoring COVID-19 case rates, vaccine distribution and global trade as key indicators for our industry’s stability. As we continue to position for a robust recovery, we remain committed to safety and quality, while investing in our people, products and technology. I am proud of our team’s resilience and commitment as we work to rebuild trust, improve our performance and deliver for our commercial, defense, space and services customers.”
As part of Boeing’s ongoing focus on global sustainability, the company published its first integrated Sustainability Report in July. “This was an important step in our continued efforts to reinforce our Environmental, Social, and Governance principles,” Calhoun said.
| Table 2. Cash Flow | Second Quarter | First Half | ||||||
| (Ms) | 2021 | 2020 | 2021 | 2020 | ||||
| Operating Cash Flow | ($483) | ($5,280) | ($3,870) | ($9,582) | ||||
| Less Additions to Property, Plant & Equipment | ($222) | ($348) | ($513) | ($776) | ||||
| Free Cash Flow* | ($705) | ($5,628) | ($4,383) | ($10,358) | ||||
| *Non-GAAP measure; complete definitions of Boeing’s non-GAAP measures are on page 6, “Non-GAAP Measures Disclosures.” | ||||||||
Operating cash flow improved to ($0.5)bn in the quarter, driven by higher commercial deliveries, higher order receipts, and lower expenditures (Table 2).
| Table 3. Cash, Marketable Securities and Debt Balances | Quarter-End | |||
| (Billions) | Q2 21 | Q1 21 | ||
| Cash | $8.2 | $7.0 | ||
| Marketable Securities1 | $13.1 | $14.9 | ||
| Total | $21.3 | $21.9 | ||
| Debt Balances: | ||||
| The Boeing Company, net of intercompany loans to BCC | $62.1 | $62.0 | ||
| Boeing Capital, including intercompany loans | $1.5 | $1.6 | ||
| Total Consolidated Debt | $63.6 | $63.6 | ||
| 1 Marketable securities consists primarily of time deposits due within one year classified as “short-term investments.” | ||||
Cash and investments in marketable securities decreased to $21.3bn, compared to $21.9bn at the beginning of the quarter, primarily driven by operating cash outflows (Table 3). The company has access to credit facilities of $14.8bn which remain undrawn.
Total company backlog at quarter-end was $363 bn.
Segment Results
Commercial Airplanes
| Table 4. Commercial Airplanes | Second Quarter | First Half | |||||||||
| (Dollars in Ms) | 2021 | 2020 | Change | 2021 | 2020 | Change | |||||
| Commercial Airplanes Deliveries | 79 | 20 | 295% | 156 | 70 | 123% | |||||
| Revenues | $6,015 | $1,633 | 268% | $10,284 | $7,838 | 31% | |||||
| Loss from Operations | ($472) | ($2,762) | NM | ($1,328) | ($4,830) | NM | |||||
| Operating Margin | (7.8)% | (169.1)% | NM | (12.9)% | (61.6)% | NM | |||||
Commercial Airplanes second-quarter revenue increased to $6.0 bn primarily driven by higher commercial airplane deliveries. Second-quarter operating margin improved to (7.8) percent, primarily due to lower period costs as well as higher delivery volume (Table 4).
Boeing is continuing to make progress on the global safe return to service of the 737 MAX. Since the FAA’s approval to return the 737 MAX to operations in November 2020, Boeing has delivered more than 130 737 MAX aircraft and airlines have returned more than 190 previously grounded airplanes to service. 30 airlines are now operating the 737 MAX, safely flying nearly 95,000 revenue flights totaling more than 218,000 flight hours (as of July 25, 2021). The 737 program is currently producing at a rate of approximately 16 per month and continues to expect to gradually increase production to 31 per month in early 2022 with further gradual increases to correspond with market demand. The company will continue to assess the production rate plan as it monitors the market environment and engages in customer discussions.
As Boeing has previously shared, the company is conducting inspections and rework and continues to engage in detailed discussions with the FAA on verification methodology for 787. In connection with these efforts, the company announced earlier this month that it has identified additional rework that will be required on undelivered 787s. Based on our assessment of the time required to complete this work, Boeing is reprioritizing production resources for a few weeks to support the inspection and rework. As that work is performed, the 787 production rate will temporarily be lower than five per month and will gradually return to that rate. Boeing expects to deliver fewer than half of the 787s currently in inventory this year.
Commercial Airplanes secured orders for 200 737 aircraft for United Airlines, 34 737 aircraft for Southwest Airlines, and a total of 31 freighter aircraft. Commercial Airplanes delivered 79 airplanes during the quarter and backlog included over 4,100 airplanes valued at $285 bn.
Defense, Space & Security
| Table 5. Defense, Space & Security | Second Quarter | First Half | |||||||||
| (Dollars in Ms) | 2021 | 2020 | Change | 2021 | 2020 | Change | |||||
| Revenues | $6,876 | $6,588 | 4% | $14,061 | $12,630 | 11% | |||||
| Earnings from Operations | $958 | $600 | 60% | $1,363 | $409 | 233% | |||||
| Operating Margin | 13.9% | 9.1% | 53% | 9.7% | 3.2% | 203% | |||||
Defense, Space & Security second-quarter revenue increased to $6.9bn driven by higher KC-46A Tanker and P-8A Poseidon volume. Second-quarter operating margin increased to 13.9 percent, primarily reflecting the absence of a charge on the KC-46A Tanker program as compared to second quarter 2020, as well as a favorable non-US contract adjustment.
During the quarter, Defense, Space & Security secured an award for 14 H-47 extended-range Chinook helicopters for the U.K. Royal Air Force and signed an agreement with the German Ministry of Defense for five P-8A Poseidon aircraft. Defense, Space & Security conducted the first MQ-25 unmanned aerial refueling of a F/A-18 Super Hornet and successfully joined T-7A Red Hawk front and aft sections in under 30 minutes enabled by digital design. Also, the first Core Stage for NASA’s Space Launch System began stacking with other Artemis I elements.
Backlog at Defense, Space & Security was $59bn, of which 32 percent represents orders from customers outside the U.S.
Global Services second-quarter revenue increased to $4.1bn and second-quarter operating margin increased to 13.1 percent primarily driven by higher commercial services volume. Operating margin was also favorably impacted by lower asset impairments, lower severance costs, and mix of products and services.
During the quarter, Global Services signed an expanded parts agreement with Turkish Technic and announced a partnership to expand capacity for 737-800 Boeing Converted Freighters. Global Services was also selected to provide P-8A training and sustainment as well as C-17 training to the U.K. Royal Air Force, and was awarded a modification for KC-46A interim contract support for the U.S. Air Force.
revenue from other unallocated items and eliminations was primarily due to the timing of allocations. The loss from other unallocated items and eliminations was impacted by lower deferred compensation expense as compared to the second quarter of 2020. Interest and debt expense increased due to higher debt balances. The second quarter 2021 effective tax rate primarily reflects benefits from a lower valuation allowance.
General Dynamics
28 Jul 21. General Dynamics Reports Second-Quarter 2021 Financial Results
– Net earnings of $737m, up 17.9% from year-ago quarter
– Diluted EPS of $2.61, up 19.7% from year-ago quarter
– $1.1bn in cash provided by operating activities
– Very strong Gulfstream order activity
General Dynamics (NYSE: GD) today reported second-quarter 2021 net earnings of $737m on revenue of $9.2bn. Diluted earnings per share (EPS) were $2.61. EPS grew 19.7% on a 17.9% increase in net earnings, as company-wide operating margin expanded to 10.4%, up 140 basis points from the year-ago quarter. Backlog of $89.2bn was up 8% from the year-ago quarter.
“The company performed impressively this quarter, delivering very strong cash flow, improved margins and significant Aerospace order activity,” said Phebe N. Novakovic, chairman and chief executive officer. “Emerging from the pandemic, we remain focused on operating discipline and wise deployment of capital.”
Cash
Net cash provided by operating activities in the quarter totaled $1.1bn. Free cash flow from operations, defined as net cash provided by operating activities, less capital expenditures, was $943 m.
Backlog
Backlog at the end of second-quarter 2021 was $89.2bn. Estimated potential contract value, representing management’s estimate of value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $41.1bn. Total estimated contract value, the sum of all backlog components, was $130.3bn at the end of the quarter.
Overall demand remained strong in the quarter, with a consolidated book-to-bill ratio of 1-to-1.
Significant awards in the quarter included $135m from the U.S. Navy to provide ongoing lead yard services for the Virginia-class submarine program and options totaling $1.6bn of additional potential value; $620m from the U.S. Army to upgrade Stryker vehicles to the double-V-hull A1 configuration; $435m from the Army to produce Stryker Initial Maneuver Short-Range Air Defense (IM-SHORAD) vehicles; $240 m from the Centers for Medicare and Medicaid Services (CMS) for several contracts, including work to provide cloud services and software tools; $145m from the Army for the production of Hydra-70 rockets; and $865m for several key contracts for classified customers. (Source: PR Newswire)
Honeywell
23 Jul 21. Honeywell Beats Guidance And Delivers Outstanding Second-Quarter Results Driven By Sales And Profit Growth; Raises Midpoint Of Adjusted EPS Guidance By 15 Cents
– Sales Growth and Margin Expansion in All Four Segments; Orders up Over 20%
– Reported Sales up 18%, Organic Sales up 15%
– Operating Margin up 450 Basis Points to 18.1%; Segment Margin up 190 Basis Points to 20.4%
– Earnings Per Share of $2.04, Adjusted Earnings Per Share¹ of $2.02, up 60%
– Generated $1.3bn in Operating Cash Flow with Conversion of 89%, $1.5bn of Free Cash Flow with Adjusted Conversion² of 103%
Honeywell (NASDAQ: HON) today announced outstanding results for the second quarter that were driven by sales and segment margin growth in all four businesses. The company also raised its full-year sales, segment margin, adjusted earnings per share, and cash flow guidance.
“Building on our first-quarter momentum, we executed extremely well in the second quarter. Our results were driven by top-line growth and margin expansion in all four segments. Organic sales grew 15%, led by double-digit growth in Performance Materials and Technologies, Honeywell Building Technologies, and Safety and Productivity Solutions,” said Darius Adamczyk, chairman and chief executive officer of Honeywell. “Our increased volumes, streamlined cost base, and relentless focus on execution enabled us to expand segment margin by 190 basis points to 20.4%, exceeding the high end of our guidance by 10 basis points. As a result, we delivered adjusted earnings per share1 of $2.02, up 60% year over year and above the high end of our second-quarter guidance range. Our cash performance in the second quarter was strong, as we generated $1.5bn of free cash flow with adjusted conversion2 of 103%, all while repurchasing $1.0bn in Honeywell shares.”
Adamczyk continued, “Our strong performance in the second quarter took place in a recovering but challenging global environment. We are especially pleased to see a turnaround in several of our key end markets that were hardest hit by the pandemic, with commercial aerospace aftermarket and the UOP business returning to growth in the quarter. We are well positioned to capitalize on improving conditions as they unfold around the world and to execute on near-term growth opportunities across our portfolio, including in the warehouse automation, productivity, building products, and advanced materials markets.”
As a result of the company’s second-quarter performance and management’s outlook for the remainder of the year, Honeywell raised its full-year sales, adjusted earnings per share, and cash flow guidance and raised the midpoint of its segment margin guidance. Full-year sales are now expected to be in the range of $34.6 bn to $35.2 bn with organic sales growth in the range of 4% to 6%. Segment margin is expected to be in the range of 20.8% – 21.1%. Adjusted earnings per share3 is expected to be $7.95 to $8.10, up 10 cents from the high end of the prior guidance range. Operating cash flow is now expected to be in the range of $5.9 bn to $6.2 bn and free cash flow is now expected to be in the range of $5.3 bn to $5.6 bn. A summary of the company’s full-year guidance changes can be found in Table 1.
Second-Quarter Performance
Honeywell sales for the second quarter were up 18% on a reported basis and up 15% on an organic basis.
Aerospace sales for the second quarter were up 7% on an organic basis driven by a strong recovery in business and general aviation aftermarket demand as flight hours returned to 2019 levels, partially offset by lower defense volumes and a more gradual recovery in commercial original equipment build rates. Air transport aftermarket returned to growth as increased flight hours drove aftermarket demand. Segment margin expanded 490 basis points to 25.7%.
Honeywell Building Technologies sales for the second quarter were up 13% on an organic basis driven by broad-based global strength across the portfolio. Orders were up over 35% year over year, driven by strong bookings for building products and solutions. The buildings solutions services backlog was up over 30% year over year driven by strong bookings in North America and Asia. In addition, demand continued for our portfolio of healthy buildings solutions, with approximately $150 m of orders in the first half. Segment margin expanded 120 basis points to 22.4%.
Performance Materials and Technologies sales for the second quarter were up 10% on an organic basis driven by demand for process solutions products and thermal solutions, higher equipment volumes, licensing, and petrochemical catalyst shipments in UOP, and continued strong growth across advanced materials. Orders were up 20% year over year driven by robust demand for services, thermal solutions, catalysts, and fluorine products. Segment margin expanded 190 basis points to 20.8%.
Safety and Productivity Solutions sales for the second quarter were up 35% on an organic basis driven by another quarter of double-digit growth in the warehouse and workflow solutions, personal protective equipment, and productivity solutions and services businesses. In addition, short-cycle demand accelerated in the gas analysis and advanced sensing businesses, which both grew by high single-digits sequentially from the first quarter. Orders were up triple digits year over year in productivity solutions and services, giving us confidence in continued growth for that business. Segment margin expanded 20 basis points to 14.0%. (Source: PR Newswire)
Lockheed Martin
Lockheed Martin Reports Second Quarter 2021 Results
– Net sales of $17.0bn
– Net earnings of $1.8bn, or $6.52 per share
– Generated cash from operations of $1.3bn
– Increases 2021 financial outlook for earnings per share
29 Jul 21. Lockheed Martin Corporation [NYSE: LMT] today reported second quarter 2021 net sales of $17.0bn, compared to $16.2bn in the second quarter of 2020. Net earnings in the second quarter of 2021 were $1.8 bn, or $6.52 per share, compared to $1.6bn, or $5.79 per share, in the second quarter of 2020. Second quarter 2021 net earnings include a loss of $225m ($169m, or $0.61 per share, after tax), recorded at Aeronautics, related to performance issues experienced on a classified program. Net earnings for the second quarter 2020 include a noncash impairment charge of $128 m ($96 m, or $0.34 per share, after tax) for an investment in a joint venture that the company sold. Cash from operations in the second quarter of 2021 was $1.3 bn, compared to $2.2 bn in the second quarter of 2020.
“In my first year leading our company, I’m proud of the extraordinary resolve demonstrated by our 114,000 team members to rise above the challenges of the pandemic in support of our customers, our nation and our allies. This is reflected in our solid sales growth across each business area this quarter,” said Lockheed Martin Chairman, President and CEO James Taiclet. “Our teams continue to deliver on key platform programs while also advancing technologies critical for 21st century deterrence and scientific discovery. And as a result, we are maintaining our prior guidance for full-year sales, segment operating profit, and cash from operations, while raising guidance for full-year EPS.”
Summary Financial Results
The following table presents the company’s summary financial results.
| (in millions, except per share data) | Quarters Ended1 | Six Months Ended | ||||||||||||||||
| June 27,
2021 |
June 28,
2020 |
June 27,
2021 |
June 28,
2020 |
|||||||||||||||
| Net sales | $ | 17,029 | $ | 16,220 | $ | 33,287 | $ | 31,871 | ||||||||||
| Business segment operating profit2,3 | $ | 1,766 | $ | 1,790 | $ | 3,515 | $ | 3,515 | ||||||||||
| Unallocated items | ||||||||||||||||||
| FAS/CAS operating adjustment | 489 | 469 | 978 | 938 | ||||||||||||||
| Severance and restructuring charges | — | — | (36) | — | ||||||||||||||
| Other, net4 | (63) | (173) | (83) | (245) | ||||||||||||||
| Total unallocated items | 426 | 296 | 859 | 693 | ||||||||||||||
| Consolidated operating profit | $ | 2,192 | $ | 2,086 | $ | 4,374 | $ | 4,208 | ||||||||||
| Net earnings | $ | 1,815 | $ | 1,626 | $ | 3,652 | $ | 3,343 | ||||||||||
| Diluted earnings per share | $ | 6.52 | $ | 5.79 | $ | 13.08 | $ | 11.87 | ||||||||||
| Cash from operations5 | $ | 1,268 | $ | 2,182 | $ | 3,016 | $ | 4,496 | ||||||||||
| 1 | The company closes its books and records on the last Sunday of the calendar quarter to align its financial closing with its business processes, which was on June 27 for the second quarter of 2021 and June 28 for the second quarter of 2020. The consolidated financial statements and tables of financial information included herein are labeled based on that convention. This practice only affects interim periods, as the company’s fiscal year ends on Dec. 31. |
|||||||||||||||||
| 2 | Business segment operating profit is a non-GAAP measure. See the “Non-GAAP Financial Measures” section of this news release for more information. |
|||||||||||||||||
| 3 | The company has experienced performance issues on a classified program at its Aeronautics business segment. During the second quarter of 2021, the company completed a comprehensive review of the program and determined that estimated total costs to complete the program are expected to exceed the contract price. As a result, the company recorded a loss of $225m ($169m, or $0.61 per share, after tax) at its Aeronautics business segment. |
|||||||||||||||||
| 4 | In the second quarter of 2020, the company recognized a noncash impairment charge of $128m ($96m, or $0.34 per share, after tax) for its investment in the international equity method investee, Advanced Military Maintenance, Repair and Overhaul Center (AMMROC), which the company sold. |
|||||||||||||||||
| 5 | Cash from operations in the second quarter of 2021 reflects federal income tax payments of $640m and cash payments for the employer portion of payroll taxes of $182m, compared to no payments in the second quarter of 2020 due to the deferral of $400m of federal tax payments from the second quarter of 2020 to the third quarter of 2020 pursuant to IRS guidance and $160m for the employer portion of payroll taxes from the second quarter of 2020 to fourth quarters of 2021 and 2022 pursuant to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). |
|||||||||||||||||
2021 Financial Outlook
The following table and other sections of this news release contain forward-looking statements, which are based on the company’s current expectations. Actual results may differ materially from those projected. It is the company’s practice not to incorporate adjustments into its financial outlook for proposed acquisitions, divestitures, ventures, pension risk transfer transactions, changes in law, or new accounting standards until such items have been consummated, enacted or adopted. For additional factors that may impact the company’s actual results, refer to the “Forward-Looking Statements” section in this news release.
| (in millions, except per share data) | Current Guidance1 | April 2021 Outlook1 | ||||
| Net sales | $67,300 – $68,700 | $67,300 – $68,700 | ||||
| Business segment operating profit | $7,380 – $7,520 | $7,380 – $7,520 | ||||
| Net FAS/CAS pension adjustment2 | ~$2,330 | ~$2,330 | ||||
| Diluted earnings per share | $26.70 – $27.00 | $26.40 – $26.70 | ||||
| Cash from operations | ≥$8,900 | ≥$8,900 | ||||
| 1 | The company’s 2021 financial outlook reflects the anticipated impacts from the COVID-19 pandemic based on the company’s understanding at the time of this news release. However, the ultimate impacts of COVID-19 on the company’s financial outlook for 2021 and beyond remains uncertain and there can be no assurance that the company’s underlying assumptions are correct. Additionally, the 2021 financial outlook reflects the UK Ministry of Defence’s renationalization of the Atomic Weapons Establishment program on June 30, 2021. The 2021 financial outlook also reflects the impact of the unrealized and realized gains from investments held by the Lockheed Martin Ventures Fund year to date, but does not include any future gains or losses related to market volatility and changes in valuations of the company’s investment holdings. Further, the 2021 financial outlook does not incorporate the pending acquisition of Aerojet Rocketdyne Holdings, Inc. previously announced on Dec. 20, 2020. |
|||||
| 2 | The net FAS/CAS pension adjustment is presented as a single amount and includes total expected U.S. Government cost accounting standards (CAS) pension cost of approximately $2,065m and total expected financial accounting standards (FAS) pension income of approximately $265 m. CAS pension cost and the service cost component of FAS pension income are included in operating profit. The non-service cost components of FAS pension income are included in non-operating income. |
|||||
Cash Activities
The company’s cash activities in the second quarter of 2021, included the following:
- making capital expenditures of $318m, compared to $343m in the second quarter of 2020;
- paying cash dividends of $721m, compared to $671m in the second quarter of 2020;
- repurchasing 1.3 m shares for $500m pursuant to an accelerated share repurchase agreement (ASR) (and retiring an additional 1.0 m shares for a first quarter 2021 ASR that settled in the second quarter of 2021); compared to repurchasing 0.7m shares for $259m in the second quarter of 2020 (and retiring an additional 0.4m shares for a first quarter 2020 ASR that settled in the second quarter of 2020); and
- accelerating $1.4 bn of payments to suppliers in the second quarter 2021 that were due in the third quarter of 2021; compared to accelerating $1.3 bn of payments to suppliers in the second quarter 2020 that were due in the third quarter of 2020.
Segment Results
The company operates in four business segments organized based on the nature of products and services offered: Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS) and Space. The following table presents summary operating results of the company’s business segments and reconciles these amounts to the company’s consolidated financial results.
| (in millions) | Quarters Ended | Six Months Ended | ||||||||||||||||
| June 27, 2021 |
June 28, 2020 |
June 27, 2021 |
June 28, 2020 |
|||||||||||||||
| Net sales | ||||||||||||||||||
| Aeronautics | $ | 6,666 | $ | 6,503 | $ | 13,053 | $ | 12,872 | ||||||||||
| Missiles and Fire Control | 2,944 | 2,801 | 5,693 | 5,420 | ||||||||||||||
| Rotary and Mission Systems | 4,242 | 4,039 | 8,349 | 7,785 | ||||||||||||||
| Space | 3,177 | 2,877 | 6,192 | 5,794 | ||||||||||||||
| Total net sales | $ | 17,029 | $ | 16,220 | $ | 33,287 | $ | 31,871 | ||||||||||
| Operating profit | ||||||||||||||||||
| Aeronautics | $ | 572 | $ | 739 | $ | 1,265 | $ | 1,411 | ||||||||||
| Missiles and Fire Control | 401 | 370 | 797 | 766 | ||||||||||||||
| Rotary and Mission Systems | 458 | 429 | 891 | 805 | ||||||||||||||
| Space | 335 | 252 | 562 | 533 | ||||||||||||||
| Total business segment operating profit | 1,766 | 1,790 | 3,515 | 3,515 | ||||||||||||||
| Unallocated items | ||||||||||||||||||
| FAS/CAS operating adjustment | 489 | 469 | 978 | 938 | ||||||||||||||
| Severance and restructuring charges | — | — | (36) | — | ||||||||||||||
| Other, net | (63) | (173) | (83) | (245) | ||||||||||||||
| Total unallocated items | 426 | 296 | 859 | 693 | ||||||||||||||
| Total consolidated operating profit | $ | 2,192 | $ | 2,086 | $ | 4,374 | $ | 4,208 | ||||||||||
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. Operating profit of the company’s business segments includes the company’s share of earnings or losses from equity method investees as the operating activities of the investees are closely aligned with the operations of its business segments.
Operating profit of the company’s business segments also excludes the FAS/CAS pension operating adjustment described below, 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.
The company recovers CAS pension cost through the pricing of its products and services on U.S. Government contracts and, therefore, recognizes CAS pension cost in each of its business segments’ net sales and cost of sales. The company’s consolidated financial statements must present pension and other postretirement benefit plan income calculated in accordance with FAS requirements under U.S. generally accepted accounting principles. The operating portion of the net FAS/CAS pension adjustment represents the difference between the service cost component of FAS pension income and total CAS pension cost. The non-service FAS pension income component is included in other non-operating income. The net FAS/CAS pension adjustment increases or decreases CAS pension cost to equal total FAS pension income (both service and non-service).
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 for which it recognizes revenue over time using the percentage-of-completion cost-to-cost method to measure progress towards completion. Increases in profit booking rates, typically referred to as risk retirements, 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. Increases or decreases in profit booking rates are recognized in the current period and reflect the inception-to-date effect of such changes.
Segment operating profit and margin may also be impacted favorably or unfavorably by other items, which may or may not impact sales. Favorable items may include the positive resolution of contractual matters, cost recoveries on severance and restructuring charges, insurance recoveries and gains on sales of assets. Unfavorable items may include the adverse resolution of contractual matters; restructuring charges, except for significant severance actions which are excluded from segment operating results; reserves for disputes; certain asset impairments; and losses on sales of certain assets.
The company’s consolidated net adjustments not related to volume, including net profit booking rate adjustments, represented approximately 22% of total segment operating profit in the second quarter of 2021, as compared to 27% in the second quarter of 2020.
Aeronautics
| (in millions) | Quarters Ended | Six Months Ended | ||||||||||||||||
| June 27, 2021 |
June 28, 2020 |
June 27, 2021 |
June 28, 2020 |
|||||||||||||||
| Net sales | $ | 6,666 | $ | 6,503 | $ | 13,053 | $ | 12,872 | ||||||||||
| Operating profit | 572 | 739 | 1,265 | 1,411 | ||||||||||||||
| Operating margin | 8.6 | % | 11.4 | % | 9.7 | % | 11.0 | % | ||||||||||
Aeronautics’ net sales during the second quarter of 2021 increased $163m, or 3%, compared to the same period in 2020. The increase was primarily attributable to about $100m for the F-16 program due to increased production volume that was partially offset by decreased sustainment volume; and about $90m for the F-35 program due to increased production and sustainment volume that was partially offset by decreased development activities. These increases were partially offset by lower net sales of approximately $60m for the F-22 program due to decreased sustainment volume.
Aeronautics’ operating profit during the second quarter of 2021 decreased $167m, or 23%, compared to the same period in 2020. Operating profit decreased due to a loss of approximately $225 m in the second quarter of 2021 for performance issues experienced on a classified program; and about $20m for the F-22 program due to lower risk retirements and sustainment volume. These decreases were partially offset by higher operating profit of approximately $45m for the C-130 program primarily due to higher risk retirements on sustainment activities; and about $20m for the F-16 program due to increased production volume and higher risk retirements. Operating profit for the F-35 program was comparable as higher production and sustainment volume was offset by lower risk retirements. Adjustments not related to volume, including net profit booking rate adjustments, were $180m lower in the second quarter of 2021 compared to the same period in 2020.
Missiles and Fire Control
| (in millions) | Quarters Ended | Six Months Ended | ||||||||||||||||
| June 27, 2021 |
June 28, 2020 |
June 27, 2021 |
June 28, 2020 |
|||||||||||||||
| Net sales | $ | 2,944 | $ | 2,801 | $ | 5,693 | $ | 5,420 | ||||||||||
| Operating profit | 401 | 370 | 797 | 766 | ||||||||||||||
| Operating margin | 13.6 | % | 13.2 | % | 14.0 | % | 14.1 | % | ||||||||||
MFC’s net sales during the second quarter of 2021 increased $143m, or 5%, compared to the same period in 2020. The increase was primarily attributable to higher net sales of approximately $110m for tactical and strike missile programs due to higher production volume (Army Tactical Missile System (ATACMS) and Long Range Anti-Ship Missile (LRASM)); and about $35 m for sensors and global sustainment programs due to higher service volume (primarily Special Operations Forces Global Logistics Support Services (SOF GLSS)) and close out activities related to the Warrior Capability Sustainment Program (Warrior) that was terminated by the customer in March 2021.
MFC’s operating profit during the second quarter of 2021 increased $31m, or 8%, compared to the same period in 2020. Operating profit increased approximately $45m for sensors and global sustainment programs primarily due to the reversal of the portion of previously recorded losses on the Warrior program in the second quarter of 2021 that are no longer expected to be incurred as a result of the program being terminated. This increase was partially offset by lower operating profit of approximately $15m on integrated air and missile defense programs due to lower risk retirements (primarily Terminal High Altitude Area Defense (THAAD)). Operating profit for tactical and strike missile programs was comparable as higher production volume (ATACMS and LRASM) was offset by lower volume on the Long Range Stand-Off program. Adjustments not related to volume, including net profit booking rate adjustments, were $25m higher in the second quarter of 2021 compared to the same period in 2020.
Rotary and Mission Systems
| (in millions) | Quarters Ended | Six Months Ended | ||||||||||||||||
| June 27, 2021 |
June 28, 2020 |
June 27, 2021 |
June 28, 2020 |
|||||||||||||||
| Net sales | $ | 4,242 | $ | 4,039 | $ | 8,349 | $ | 7,785 | ||||||||||
| Operating profit | 458 | 429 | 891 | 805 | ||||||||||||||
| Operating margin | 10.8 | % | 10.6 | % | 10.7 | % | 10.3 | % | ||||||||||
RMS’ net sales during the second quarter of 2021 increased $203m, or 5%, compared to the same period in 2020. The increase was attributable to higher net sales of approximately $230m for Sikorsky helicopter programs due to higher production volume on the Black Hawk, Combat Rescue Helicopter (CRH), and CH-53K programs that was partially offset by lower production volume on Seahawk programs. This increase was partially offset by lower net sales of about $35m for integrated warfare systems and sensors (IWSS) programs due to lower volume on the TPQ-53 and the Littoral Combat Ship (LCS) programs that was partially offset by higher volume on the Canadian Surface Combatant (CSC) and Aegis Combat System (Aegis) programs.
RMS’ operating profit during the second quarter of 2021 increased $29m, or 7%, compared to the same period in 2020. Operating profit increased approximately $20m for Sikorsky helicopter programs due to higher production volume on the Black Hawk, CRH, and CH-53K programs. Operating profit for IWSS programs was comparable as risk retirements on a ground-based radar program were offset by lower risk retirements on the LCS program. Adjustments not related to volume, including net profit booking rate adjustments, were comparable in the second quarter of 2021 to the same period in 2020.
Space
| (in millions) | Quarters Ended | Six Months Ended | ||||||||||||||||
| June 27, 2021 |
June 28, 2020 |
June 27, 2021 |
June 28, 2020 |
|||||||||||||||
| Net sales | $ | 3,177 | $ | 2,877 | $ | 6,192 | $ | 5,794 | ||||||||||
| Operating profit | 335 | 252 | 562 | 533 | ||||||||||||||
| Operating margin | 10.5 | % | 8.8 | % | 9.1 | % | 9.2 | % | ||||||||||
Space’s net sales during the second quarter of 2021 increased $300m, or 10%, compared to the same period in 2020. The increase was primarily attributable to higher net sales of approximately $125 m for the Atomic Weapons Establishment (AWE) program due to higher volume; about $100 m for national security space programs due to higher volume (primarily Next Generation Overhead Persistent Infrared (Next Gen OPIR)); and about $80 m for strategic and missile defense programs due to higher volume (primarily hypersonic development programs). As previously disclosed, effective June 30, 2021 (subsequent to the second quarter), the UK Ministry of Defence renationalized the AWE program. Accordingly, the AWE program will no longer be included in the company’s financial results beginning in the third quarter of 2021.
Space’s operating profit during the second quarter of 2021 increased $83m, or 33%, compared to the same period in 2020. Operating profit increased approximately $45m for national security space programs primarily due to higher risk retirements (primarily Space-Based Infrared System (SBIRS)) and higher volume (primarily Next Gen OPIR); and about $35 m due to higher equity earnings from the company’s investment in United Launch Alliance (ULA). Operating profit for the AWE program was comparable as higher volume was offset by accelerated and incremental amortization expense for intangible assets. Operating profit for strategic and missile defense programs was also comparable as higher volume (hypersonic development programs) was offset by lower risk retirements (primarily Fleet Ballistic Missile (FBM) programs). Adjustments not related to volume, including net profit booking rate adjustments, were $65m higher in the second quarter of 2021 compared to the same period in 2020.
Total equity earnings (primarily ULA) recognized in Space’s operating profit were approximately $45m, or 13% of Space’s operating profit during the second quarter of 2021, compared to approximately $10m, or 4% in the second quarter of 2020.
Income Taxes
The company’s effective income tax rate was 16.4% for the second quarter of 2021 and 17.1% for the second quarter of 2020. The rate for the second quarter of 2021 is lower primarily due to increased tax deductions for foreign derived intangible income. The rates for both periods benefited from tax deductions for foreign derived intangible income, the research and development tax credit, and dividends paid to the company’s defined contribution plans with an employee stock ownership plan feature.
Use of Non-GAAP Financial Measures
This news release contains the following non-generally accepted accounting principles (non-GAAP) financial measures (as defined by U.S. Securities and Exchange Commission (SEC) Regulation G). While management believes that these non-GAAP financial measures may be useful in evaluating the financial performance of the company, this information should be considered supplemental and is not a substitute for financial information prepared in accordance with GAAP. In addition, the company’s definitions for non-GAAP financial measures may differ from similarly titled measures used by other companies or analysts.
Business segment operating profit represents operating profit from the company’s business segments before unallocated income and expense. This measure is used by the company’s senior management in evaluating the performance of its business segments and is a performance goal in the company’s annual incentive plan. Business segment operating margin is calculated by dividing business segment operating profit by sales. The table below reconciles the non-GAAP measure business segment operating profit with the most directly comparable GAAP financial measure, consolidated operating profit.
| (in millions)
|
Current Update1 | April 20211 | ||||
| Business segment operating profit (non-GAAP) | $7,380 – $7,520 | $7,380 – $7,520 | ||||
| FAS/CAS operating adjustment2 | ~1,955 | ~1,955 | ||||
| Other, net | ~(300) | ~(355) | ||||
| Consolidated operating profit (GAAP) | $9,035 – $9,175 | $8,980 – $9,120 | ||||
| 1 | The company’s 2021 financial outlook reflects the anticipated impacts from the COVID-19 pandemic based on the company’s understanding at the time of this news release. However, the ultimate impacts of COVID-19 on the company’s financial outlook for 2021 and beyond remains uncertain and there can be no assurance that the company’s underlying assumptions are correct. Additionally, the 2021 financial outlook reflects the UK Ministry of Defence’s renationalization of the AWE program on June 30, 2021. Further, the 2021 financial outlook does not incorporate the pending acquisition of Aerojet Rocketdyne Holdings, Inc. announced on Dec. 20, 2020. |
|||||
| 2 | Refer to the supplemental table “Other Financial and Operating Information” included in this news release for a detail of the FAS/CAS operating adjustment, which excludes $375 m of expected non-service FAS income that will be recorded in non-operating income (expense). |
|||||
Northrop Grumman
Northrop Grumman Reports Second Quarter 2021 Financial Results
- Strong Performance Continues; 2021 Sales and Earnings Guidance Raised
- Sales Increase 3 Percent to $9.2bn; Organic Sales1 Increase 10 Percent
- Operating Margin Rate of 11.4 Percent, Segment Operating Margin Rate1 of 12.2 Percent
- EPS Increase 7 Percent to $6.42; Year to Date EPS Increase 78 Percent to $19.89 and Transaction-Adjusted EPS1 Increase 16 Percent to $13.00
- Company Raises 2021 Sales Guidance to $35.8 Bn to $36.2 Bn and Transaction adjusted EPS1 Guidance to $24.40 to $24.80
29 Jul 21. Northrop Grumman Corporation (NYSE: NOC) reported second quarter 2021 sales increased 3 percent to $9.2bn from $8.9bn in the second quarter of 2020. Second quarter 2021 net earnings increased 3 percent to $1.04bn, or $6.42 per diluted share from $1.01 bn, or $6.01 per diluted share, in the second quarter of 2020.
“Northrop Grumman delivered outstanding second quarter results, reflecting the strength of our portfolio and its alignment to national security priorities, as well as our team’s ability to perform on our commitments,” said Kathy Warden, chairman, chief executive officer and president. “Based on the strength of our growth and performance year-to-date and our enhanced outlook for the year, we have increased our 2021 sales and EPS guidance.”
1 Non-GAAP measure – see definitions at the end of this earnings release.
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, year to date transaction-adjusted net earnings1 increased 13 percent and transaction-adjusted EPS1 increased 16 percent. Second quarter 2021 net earnings do not include any transaction-related adjustments. Transaction-adjusted net earnings1 and transactionadjusted EPS1 are measures the company uses to compare performance to prior periods and for EPS guidance.
Sales
Second quarter 2021 sales increased $267m, or 3 percent, primarily due to higher sales at Space Systems and Mission Systems, partially offset by lower sales at Defense Systems principally due to the impact of the IT services divestiture. Second quarter 2021 organic sales1 (total sales excluding sales attributable to the company’s IT services divestiture) increased $852m, or 10 percent. Operating Income and Margin Rate Second quarter 2021 operating income increased $50 m, or 5 percent, due to higher segment operating income and lower unallocated corporate expense, partially offset by a lower FAS/CAS operating adjustment. Second quarter 2021 operating margin rate increased to 11.4 percent reflecting a higher segment operating margin rate in addition to the items above. Segment Operating Income and Margin Rate Second quarter 2021 segment operating income increased $86m, or 8 percent, due to higher sales and a higher segment operating margin rate. Higher operating income at Space Systems and Mission Systems was partially offset by lower operating income at Defense Systems, principally due to the impact of the IT services divestiture, and Aeronautics Systems. Second quarter 2020 segment operating income from the IT services business was $60m.
Segment operating margin rate increased to 12.2 percent from 11.6 percent due to higher operating margin rates at Mission Systems, Defense Systems and Space Systems, partially offset by a lower operating margin rate at Aeronautics Systems. Federal and Foreign Income Taxes
The second quarter 2021 effective tax rate increased to 20.4 percent from 16.5 percent in the prior year period primarily due to a change made in tax revenue recognition on certain long-term contracts, which increased taxable income in years prior to the 2017 Tax Cuts and Jobs Act at a rate above the current statutory rate.
Cash Flows
Second quarter cash provided by operating activities decreased $1.3bn from the prior year period due to changes in trade working capital and $39 m of federal and state taxes paid related to the IT services divestiture. The prior year period benefited from CARES Act payroll tax deferrals and the increased Department of Defense (DoD) progress payment rates. Year to date 2021 cash provided by operating activities decreased $382 m principally due to the $390 m of federal and state taxes paid related to the IT services divestiture. Second quarter 2021 transaction-adjusted free cash flow1 decreased $824m principally due to changes in trade working capital.
Year to date 2021 transaction-adjusted free cash flow1 increased $209m due to improved trade working capital. Awards and Backlog Second quarter and year to date 2021 net awards totaled $6.5 bn and $15.4 bn, respectively, and backlog totaled $76.6bn. Significant second quarter new awards include $1.7bn for restricted programs, $0.4bn for F-35, $0. bn for GMLRS, $0.3bn for E-2 and $0.2bn for Global Hawk.
1 Non-GAAP measure
Segment Operating Results
AERONAUTICS SYSTEMS
Sales
Second quarter 2021 sales were comparable to the prior year period. Higher restricted and E-2 production volume was offset by a reduction in A350 production activity and lower volume on the B-2 Defensive Management Systems Modernization program as well as certain Global Hawk programs as they near completion.
Operating Income
Second quarter 2021 operating income decreased $10m, or 3 percent, due to a lower operating margin rate. Operating margin rate decreased to 10.3 percent from 10.6 percent principally due to a $21m benefit recognized in the prior period in connection with the resolution of a government accounting matter, partially offset by higher net favorable EAC adjustments.
DEFENSE SYSTEMS
Sales
Second quarter 2021 sales decreased $459m, or 24 percent, primarily due to a $416m reduction in sales related to the IT services divestiture. Second quarter 2021 organic sales1 decreased $43m, or 3 percent, principally due to the close-out of the contract at the Army’s Lake City ammunition plant, partially offset by higher volume on the Guided Missile Launch Rocket System program, Republic of Korea Global Hawk Contractor Logistics Support program and production ramp-up on advanced fuze programs. Operating Income Second quarter 2021 operating income decreased $40m, or 18 percent, primarily due to the impact of the IT services divestiture. Operating margin rate increased to 12.4 percent from 11.5 percent and reflects improved performance at Battle Management and Missile Systems due, in part, to changes in mix as a result of recent contract completions.
1 Non-GAAP measure
MISSION SYSTEMS
Sales
Second quarter 2021 sales increased $142m, or 6 percent, due to higher volume across the sector, partially offset by a $131m reduction in sales related to the IT services divestiture. Second quarter 2021 organic sales1 increased $273m, or 12 percent. Maritime/ Land Systems and Sensors sales increased primarily due to higher volume on land systems, including the Ground/Air Task-Oriented Radar program, and higher marine systems and international volume. Navigation, Targeting and Survivability sales increased primarily due to higher intercompany volume on the Ground Based Strategic Deterrent (GBSD) program. Airborne Multifunction Sensors sales increased principally due to higher airborne radar volume, including the Scalable Agile Beam Radar and Multi-role Electronically Scanned Array programs. Networked Information Solutions sales increased primarily due to higher volume on electronic warfare programs, including the Joint Counter Radio-Controlled Improvised Explosive Device Electronic Warfare program.
Operating Income
Second quarter 2021 operating income increased $61m, or 18 percent, due to higher sales volume and a higher operating margin rate. Operating margin rate increased to 15.8 percent from 14.2 percent principally due to the favorable resolution of certain government accounting matters and changes in contract mix toward more fixed-price content, largely as a result of the IT services divestiture.
SPACE SYSTEMS
Sales
Second quarter 2021 sales increased $700m, or 34 percent, primarily due to higher sales in both the Launch & Strategic Missiles and Space business areas, partially offset by a $43m reduction in sales related to the IT services divestiture. Second quarter 2021 organic sales1 increased $743m, or 37 percent. Launch & Strategic Missiles sales increased primarily due to ramp-up on GBSD and the Next Generation Interceptor program as well as higher volume on Commercial Resupply Service missions and hypersonics programs. Space sales were driven by higher volume on restricted programs, Artemis and the Next Generation Overhead Persistent Infrared program.
1 Non-GAAP measure
Operating Income
Second quarter 2021 operating income increased $92m, or 44 percent, due to higher sales volume and a higher operating margin rate. Operating margin rate increased to 11.0 percent from 10.2 percent principally due to higher net favorable EAC adjustments on commercial space programs.
Raytheon
27 Jul 21. Raytheon Technologies Reports Strong Second Quarter 2021 Results; Raises 2021 Outlook.
Adjusted EPS and Free Cash Flow Exceeded Expectations in Q2; Raises Adjusted EPS and Free Cash Flow and Low End of Sales Outlook for 2021; Increases Gross Merger Cost Synergy Target to $1.5bn
Raytheon Technologies Corporation (NYSE: RTX) reported second quarter 2021 results.
Second quarter 2021
- Sales of $15.9bn
- GAAP EPS from continuing operations of $0.69, which included $0.34 of acquisition accounting adjustments and net significant and/or non-recurring charges
- Adjusted EPS of $1.03
- Operating cash flow from continuing operations of $1.3 bn; Free cash flow of $966 m
- Company backlog of $151.8 bn; including defense backlog of $66.1bn and book-to-bill of 1.12
- Achieved approximately $185m of incremental RTX synergies
- Repurchased $632 m of RTX shares
Raytheon Technologies updates its 2021 outlook and now anticipates the following:
Outlook for full year 2021
- Sales of $64.4 – $65.4bn, up from $63.9 – $65.4bn
- Adjusted EPS of $3.85 – $4.00, up from $3.50 – $3.70
- Free cash flow of $4.5 – $5.0bn, up from approximately $4.5bn
“Raytheon Technologies delivered strong second quarter results driven by the growth in our defense businesses and our ability to capitalize on the commercial aerospace recovery,” said Raytheon Technologies Chairman and Chief Executive Officer Greg Hayes. “Our solid execution gives us the confidence to raise our adjusted EPS and free cash flow outlook, as well as the low end of our sales outlook range for 2021. In addition, our relentless focus on operational excellence, structural cost reduction and integration execution has enabled us to further raise our merger related gross cost synergy target by $200m to $1.5bn.”
Hayes continued, “As a result of our industry-leading franchises and differentiated technologies, we generated significant program wins during the quarter that will drive continued top and bottom-line growth well into the future.”
Raytheon Technologies reported second quarter sales of $15.9bn. GAAP EPS from continuing operations was $0.69 and included $0.34 of acquisition accounting adjustments and net significant and/or non-recurring charges. This included $0.26 of acquisition accounting adjustments primarily related to intangible amortization, $0.05 related to the revaluation of deferred taxes resulting from the increase in the U.K. corporate tax rate and $0.03 of restructuring. Adjusted EPS was $1.03.
The company recorded net income from continuing operations in the second quarter of $1,040 m, which included $525 m of acquisition accounting adjustments and net significant and/or nonrecurring charges. Adjusted net income was $1,565m. Operating cash flow from continuing operations in the second quarter was $1,326m. Capital expenditures were $360m, resulting in free cash flow of $966m.
| Summary Financial Results – Continuing Operations | ||||||||
| 2nd Quarter | ||||||||
| ($ in millions, except EPS) | 2021 | 2020 | % Change | |||||
| Reported | ||||||||
| Sales | $ | 15,880 | $ | 14,061 | 13% | |||
| Net Income | $ | 1,040 | $ | (3,844) | NM | |||
| EPS | $ | 0.69 | $ | (2.56) | NM | |||
| Adjusted | ||||||||
| Sales | $ | 15,880 | $ | 14,223 | 12% | |||
| Net Income | $ | 1,565 | $ | 583 | 168% | |||
| EPS | $ | 1.03 | $ | 0.39 | 164% | |||
| Operating Cash Flow from Continuing Operations | $ | 1,326 | $ | 210 | 531% | |||
| Free Cash Flow | $ | 966 | $ | (248) | NM | |||
Backlog and Bookings
Backlog at the end of the second quarter was $151.8bn, of which $85.7bn was from commercial aerospace and $66.1bn was from defense.
Notable defense bookings during the quarter included:
- ~$2bn for the engineering and manufacturing development (EMD) phase of the Long-Range Standoff (LRSO) Weapon System at Raytheon Missiles & Defense (RMD)
- $1.3bn for the Next Generation Interceptor (NGI) for the Missile Defense Agency at RMD
- $1.1bn of classified bookings at Raytheon Intelligence & Space (RIS)
- $365m for the Standard Terminal Automation Replacement System (STARS) program for the Federal Aviation Administration at RIS
- $327m for AIM-9X Sidewinder for the U.S. Air Force, U.S. Navy and international customers at RMD
- $242m on the Army Navy/Transportable Radar Surveillance-Model 2 (AN/TPY-2) radar program for the Missile Defense Agency at RMD
- $213m for StormBreaker for the U.S. Air Force and U.S. Navy at RMD
- $211m to provide additional upgrades to the Global Positioning System Next Generation Operational Control System (GPS OCX) program for the U.S. Air Force at RIS
Segment Results
The company’s reportable segments are Collins Aerospace, Pratt & Whitney, Raytheon Intelligence & Space (RIS) and Raytheon Missiles & Defense (RMD).
| Collins Aerospace | |||||||
| 2nd Quarter | |||||||
| ($ in millions) | 2021 | 2020 | Change | ||||
| Reported | |||||||
| Sales | $ | 4,545 | $ | 4,202 | 8% | ||
| Operating Profit (Loss) | $ | 506 | $ | (317) | NM | ||
| ROS | 11.1% | (7.5)% | 1,860 bps | ||||
| Adjusted | |||||||
| Sales | $ | 4,545 | $ | 4,298 | 6% | ||
| Operating Profit | $ | 518 | $ | 24 | 2,058% | ||
| ROS | 11.4% | 0.6% | 1,080 bps | ||||
| NM = Not Meaningful | |||||||
Collins Aerospace had second quarter 2021 adjusted sales of $4,545m, up 6 percent versus the prior year. The increase in sales was driven by a 24 percent increase in commercial aftermarket and an 8 percent increase in commercial OE, which more than offset a 7 percent decline in military. Excluding the impact of the prior year Military GPS and Space ISR divestitures and FX, military was down 1 percent in the quarter. 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 commercial OEM deliveries.
Collins Aerospace recorded adjusted operating profit of $518m in the quarter, up 2,058 percent versus the prior year. The increase in adjusted operating profit was driven by drop through on higher commercial aerospace aftermarket and OEM sales volume along with continued cost reduction actions and the benefit of contract settlements. This was partially offset by the impact of the Military GPS and Space ISR divestitures.
| Pratt & Whitney | ||||||
| 2nd Quarter | ||||||
| ($ in ms) | 2021 | 2020 | Change | |||
| Reported | ||||||
| Sales | $ | 4,280 | $ | 3,487 | 23% | |
| Operating Profit (Loss) | $ | 112 | $ | (457) | NM | |
| ROS | 2.6% | (13.1)% | 1,570 bps | |||
| Adjusted | ||||||
| Sales | $ | 4,280 | $ | 3,607 | 19% | |
| Operating Profit (Loss) | $ | 96 | $ | (151) | NM | |
| ROS | 2.2% | (4.2)% | 640 bps | |||
| NM = Not Meaningful | ||||||
Pratt & Whitney had second quarter 2021 adjusted sales of $4,280m, up 19 percent versus the prior year. The increase in sales was driven by a 41 percent increase in commercial aftermarket and a 30 percent increase in commercial OE, which more than offset a 3 percent decline in military. The increase in commercial sales was primarily due to higher shop visits and related spare part sales and commercial engine deliveries principally driven by the recovery in commercial air traffic. The decrease in military sales was primarily due to lower material inputs on military production programs.
Pratt & Whitney recorded adjusted operating profit of $96 m in the quarter. The increase in adjusted operating profit was primarily driven by drop through on higher commercial aftermarket sales volume and favorable mix.
| Raytheon Intelligence & Space | |||||||
| 2nd Quarter | |||||||
| ($ in millions) | 2021 | 2020(1) | Change | ||||
| Reported | |||||||
| Sales | $ | 3,805 | $ | 3,387 | 12% | ||
| Operating Profit | $ | 415 | $ | 309 | 34% | ||
| ROS | 10.9% | 9.1% | 180 bps | ||||
| Adjusted | |||||||
| Sales | $ | 3,805 | $ | 3,387 | 12% | ||
| Operating Profit | $ | 415 | $ | 309 | 34% | ||
| ROS | 10.9% | 9.1% | 180 bps | ||||
| 1) Prior year results have been adjusted to reflect the previously communicated reorganization of the RIS and RMD segments, which became effective on January 1, 2021. |
|||||||
| Note: Q2 2020 reported and adjusted results include RIS as of the merger date of April 3, 2020. Q2 2020 reported and adjusted numbers do not include the RIS pre-merger stub period from March 30, 2020 to April 2, 2020 which had approximately $200M of sales and $20M of operating profit. |
|||||||
RIS had second quarter 2021 adjusted sales of $3,805m, up 12 percent versus the prior year. The increase in sales was driven by the pre-merger stub period as well as growth in various Airborne ISR programs within sensing and effects, and classified cyber programs within cyber, training and services.
RIS recorded adjusted operating profit of $415m, up 34 percent versus the prior year. The increase in adjusted operating profit was primarily driven by productivity across various programs.
| Raytheon Missiles & Defense | |||||||
| 2nd Quarter | |||||||
| ($ in ms) | 2021 | 2020(1) | Change | ||||
| Reported | |||||||
| Sales | $ | 3,985 | $ | 3,506 | 14% | ||
| Operating Profit | $ | 532 | $ | 398 | 34% | ||
| ROS | 13.4% | 11.4% | 200 bps | ||||
| Adjusted | |||||||
| Sales | $ | 3,985 | $ | 3,452 | 15% | ||
| Operating Profit | $ | 532 | $ | 386 | 38% | ||
| ROS | 13.4% | 11.2% | 220 bps | ||||
| 1) Prior year results have been adjusted to reflect the previously communicated reorganization of the RIS and RMD segments, which became effective on January 1, 2021. |
|||||||
| Note: Q2 2020 reported and adjusted results include RMD as of the merger date of April 3, 2020. Q2 2020 reported and adjusted numbers do not include the RMD pre-merger stub period from March 30, 2020 to April 2, 2020 which had approximately $200m of sales and $25m of operating profit. |
|||||||
Textron
29 Jul 21. Textron Reports Second Quarter 2021 Results; Raises Full Year EPS and Cash Guidance
- EPS from continuing operations of $0.81
- Net cash from operating activities of $572m
- Aviation backlog $2.7 bn at quarter-end, up $689m in the quarter
- Full-year adjusted EPS outlook raised to a range of $3.00 to $3.20
- Full year cash flow guidance raised to a range of $800m to $900m
Textron Inc. (NYSE: TXT) today reported second quarter 2021 income from continuing operations of $0.81 per share. Adjusted net income, a non-GAAP measure that is defined and reconciled to GAAP in an attachment to this release, was also $0.81 per share for the second quarter of 2021, compared to $0.13 per share in the second quarter of 2020.
“In the quarter, we saw higher revenues across all our manufacturing segments, good execution with solid margin performance at Systems, Bell and Aviation, and strong cash generation,” said Textron Chairman and CEO Scott C. Donnelly.
Cash Flow
Net cash provided by operating activities of continuing operations of the manufacturing group for the second quarter was $572m, compared to $245m 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 $509m compared to $215m last year.
In the quarter, Textron returned $196m to shareholders through share repurchases.
Outlook
Textron now expects 2021 earnings per share from continuing operations to be in a range of $2.97 to $3.21, or $3.00 to $3.20 on an adjusted basis, up $0.20 from our previous outlook. Textron also expects cash flow from continuing operations of the manufacturing group before pension contributions to be in a range of $800m to $900m, up $200m, with planned pension contributions of about $50m.
Donnelly continued, “As the economy strengthens, our outlook reflects continued growth in business aviation, improving execution on new programs at Systems, ongoing investments in Future Vertical Lift at Bell and strong retail demand in our end-markets at Industrial.”
Second Quarter Segment Results
Textron Aviation
Revenues at Textron Aviation of $1.2bn were up $414m from the second quarter of 2020, largely due to higher Citation jet volume of $174m, aftermarket volume of $98m and commercial turboprop volume of $75 m.
Textron Aviation delivered 44 jets, up from 23 last year, and 33 commercial turboprops, up from 15 last year.
Segment profit was $96 m in the second quarter, up $162m from a year ago, due to the higher volume and mix of $117 m, a favorable impact from performance of $34m and favorable pricing, net of inflation of $11 m.
Textron Aviation backlog at the end of the second quarter was $2.7bn.
Bell
Bell revenues were $891m, up $69m from last year, on higher commercial revenues of $99m, partially offset by lower military revenues.
Bell delivered 47 commercial helicopters in the quarter, up from 27 last year.
Segment profit of $110m was down $8m, primarily due to higher research and development costs in the quarter, largely related to the future vertical lift programs.
Bell backlog at the end of the second quarter was $4.8bn.
Textron Systems
Revenues at Textron Systems were $333m, up $7m from last year’s second quarter.
Segment profit of $48m was up $11m from a year ago, largely due to a favorable impact from performance.
Textron Systems’ backlog at the end of the second quarter was $2.3 bn.
Industrial
Industrial revenues were $794m, up $232m from last year, with $169m from Fuel Systems and Functional Components and $63 m from Specialized Vehicles, largely reflecting higher volume and mix.
Segment profit of $32 m was up $43 m from the second quarter of 2020, primarily due to the higher volume and mix at each of the businesses.
Finance
Finance segment revenues were $12m, and profit was $3m.
(Source: BUSINESS WIRE)