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US Majors Report Results – Boeing Reports Huge Loss By Julian Nettlefold

The Second Quarter reporting season for the US majors kicked off with a strong showing from all apart from Boeing which was forced to announce a huge $3bn loss following the 4737 MAX grounding.

Boeing

General Dynamics

Lockheed Martin

Northrop Grumman

Raytheon

United Technologies

Boeing

 

 

 

 

 

24 Jul 19. Boeing sinks to biggest ever quarterly loss on 737 Max crisis. Prolonged grounding of bestselling jet continues to take its toll on US plane maker. Boeing slumped to a loss of close to $3bn in the second quarter — its biggest quarterly loss ever — as the prolonged grounding of its bestselling 737 Max jet continues to take its toll on the US plane maker. The company reported a net loss of $2.94bn for the second quarter after announcing last week it would book an after-tax charge of $4.9bn in the period to compensate airlines that have been affected by the grounding of the 737 Max. The company is having to pay for schedule disruptions and delays in aircraft deliveries. Boeing warned last week the charge would result in a $5.6bn cut in revenues and pre-tax earnings for the second quarter. The net loss compares with a profit of $2.2bn in the same period last year.

The US plane maker on Wednesday said revenues in the second quarter were $15.7bn, down from $24.5bn the year before, reflecting the impact of the Max crisis but also higher volumes in its defence and services businesses. It recorded an earnings per share loss of $5.21, compared with $3.73 in the same second quarter last year. The hit to its earnings underlines the magnitude of the crisis for Boeing with continuing uncertainty over exactly when the grounded jet will resume flying. The plane was taken out of service globally in March after two deadly crashes in Ethiopia and Indonesia killed 346 people. Boeing said on Wednesday that due to the continuing uncertainty surrounding the return to service of the Max it would issue new guidance for the full year at “a future date”. The company initially suspended its guidance in April. It said it continued to work “very closely” with the US aviation safety agency, the Federal Aviation Administration, to certify a proposed software update for the Max, adding that “disciplined development and testing is under way”.

“This is a defining moment for Boeing and we remain focused on our enduring values of safety, quality, and integrity in all that we do, as we work to safely return the 737 MAX to service,” said Dennis Muilenburg, chief executive of Boeing, in a statement. “During these challenging times, teams across our enterprise continue to perform at a high level while delivering on commitments and capturing new opportunities driven by strong, long-term fundamentals.” Boeing also said its first flight of its new 777X wide-body jet was delayed until early 2020, due to problems with the engine provided by General Electric. (Source: FT.com)

Boeing Reports Second-Quarter Results

* Continue to engage global regulators and customers on safe return to service of the 737 MAX

* Recorded charge and increased costs related to the 737 MAX, as previously announced

* Revenue of $15.8 bn reflecting 737 MAX impacts and higher defense and services volume

* Loss of ($5.21) per share (GAAP) and core (non-GAAP)* loss of ($5.82) per share

* Operating cash flow of ($0.6)bn; paid $1.2bn of dividends

* Total backlog of $474bn, including more than 5,500 commercial airplanes

* Cash and marketable securities of $9.6bn provide strong liquidity

* Previously issued 2019 guidance does not reflect 737 MAX impacts; new guidance to be issued at a future date

24 Jul 19. The Boeing Company [NYSE: BA] reported second-quarter revenue of $15.8bn, GAAP loss per share of ($5.21) and core loss per share (non-GAAP)* of ($5.82), reflecting the previously announced 737 MAX charge (which reduced revenue by $5.6bn and earnings by $8.74 per share) as well as lower 737 deliveries partially offset by higher defense and services volume. Boeing recorded operating cash flow of ($0.6) bn and paid $1.2bn of dividends.

The previously issued 2019 financial guidance does not reflect 737 MAX impacts. Due to the uncertainty of the timing and conditions surrounding return to service of the 737 MAX fleet, new guidance will be issued at a future date. Boeing is working very closely with the FAA on the process they have laid out to certify the 737 MAX software update and safely return the MAX to service. Disciplined development and testing is underway and we will submit the final software package to the FAA once we have satisfied all of their certification requirements. Regulatory authorities will determine the process for certifying the MAX software and training updates as well as the timing for lifting the grounding order.

“This is a defining moment for Boeing and we remain focused on our enduring values of safety, quality, and integrity in all that we do, as we work to safely return the 737 MAX to service,” said Boeing Chairman, President and Chief Executive Officer Dennis Muilenburg. “During these challenging times, teams across our enterprise continue to perform at a high level while delivering on commitments and capturing new opportunities driven by strong, long-term fundamentals.”          

Operating cash flow was ($0.6)bn in the quarter, primarily reflecting lower 737 deliveries and production rate as well as timing of receipts and expenditures. During the quarter, the company paid $1.2 bn of dividends, reflecting a 20 percent increase in dividends per share compared to the same period of the prior year.

Cash and investments in marketable securities totaled $9.6bn, compared to $7.7bn at the beginning of the quarter. Debt was $19.2 bn, up from $14.7bn at the beginning of the quarter primarily due to the issuance of new debt.

Total company backlog at quarter-end remained healthy at $474 bn and included net orders of $9bn.

Segment Results

Commercial Airplanes

Commercial Airplanes second-quarter revenue was $4.7bn reflecting the previously announced 737 MAX charge and lower 737 deliveries partially offset by favorable mix. Second-quarter operating margin was (104.7) percent reflecting the previously announced 737 MAX charge and lower 737 deliveries partially offset by a higher margin on the 787 program.

During the quarter, Commercial Airplanes delivered 90 airplanes, including 42 787s, and captured orders for two 777 freighters for DHL and six 767 freighters for FedEx. Highlights from the Paris Air Show included a letter of intent from IAG for 200 737 MAX airplanes as well as several wide body commitments. The 777X program is progressing well through pre-flight testing. While the company is still targeting late 2020 for first delivery of the 777X, there is significant risk to this schedule given engine challenges, which are delaying first flight until early 2020. 

Commercial Airplanes backlog remains healthy with more than 5,500 airplanes valued at $390bn.

Defense, Space & Security

Defense, Space & Security second-quarter revenue increased to $6.6bn primarily driven by higher volume across derivative aircraft, satellites, and weapons. Second-quarter operating margin increased to 14.7 percent primarily due to a gain on sale of property and lower cost growth on the KC-46 Tanker program compared to the second quarter of 2018.

During the quarter, Defense, Space & Security received contracts for MH-47G Block II Chinook for the U.S. Army Special Operations, F/A-18 service life modification for the U.S. Navy, Joint Direct Attack Munition for the U.S. Air Force, and Wideband Global Satellite Communication for the U.S. Air Force. Significant milestones achieved during the quarter included completion of the first T-X Trainer flight test on contract with the U.S. Air Force and the final parachute test for the Commercial Crew spacecraft.

Backlog at Defense, Space & Security was $64bn, of which 31 percent represents orders from customers outside the U.S.

Global Services

Global Services second-quarter revenue increased to $4.5bn, primarily driven by the acquisition of Boeing Distribution Services, Inc. (formerly KLX) and higher international government services volume. Second-quarter operating margin was relatively stable at 15.1 percent.

During the quarter, Global Services was awarded Performance Based Logistics contracts for AH-64 Apache for the U.S. Army and KC-767A Tanker for the Italian Air Force. At the Paris Air Show, Global Services signed commitments with ASL Aviation Holdings and GECAS for up to 45 737-800 converted freighters and announced digital solution agreements with Delta Air Lines and JetBlue Airways.

Additional Financial Information

At quarter-end, Boeing Capital’s net portfolio balance was $2.3bn. Revenue in other unallocated items and eliminations decreased primarily due to reserves related to cost accounting litigation. The change in earnings from other unallocated items and eliminations is primarily due to increased enterprise research and development investment. The effective tax rate for the second quarter decreased from the same period in the prior year primarily due to lower pre-tax earnings in the current year.

Outlook

The previously issued 2019 financial guidance does not reflect 737 MAX impacts. Due to the uncertainty of the timing and conditions surrounding return to service of the 737 MAX fleet, new guidance will be issued at a future date.

General Dynamics

 

 

 

General Dynamics Reports Second-Quarter 2019 Results

* Revenue of $9.6bn, up 4% year-over-year

* Diluted earnings per share of $2.77, up 5.7% year-over-year

* Gulfstream G600 achieves FAA certification

24 Jul 19. General Dynamics (NYSE: GD) today reported second-quarter 2019 revenue of $9.6bn, up 4 percent year-over-year, with net earnings of $806 m. Diluted earnings per share were $2.77, an increase of 5.7 percent year-over-year.

Operating margins increased sequentially by 50 basis points over the previous quarter to 11.4 percent. In June, the all-new Gulfstream G600 earned both its type and production certificates from the U.S. Federal Aviation Administration.

“Our second-quarter results reflect our relentless focus on driving down costs and improving performance,” said Phebe Novakovic, chairman and chief executive officer. “That focus on performance remains unwavering as we ramp up production of new aircraft, begin construction of both a new block and new class of submarines, and solidify our market-leading position in Information Technology.”

Backlog

General Dynamics’ total backlog at the end of second-quarter 2019 was $67.7bn. Estimated potential contract value, representing management’s estimate of value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $34.2bn. Total estimated contract value, the sum of all backlog components, was $101.9bn, up 3 percent year-over-year.

Order activity remained strong across the aerospace and defense portfolios. Aerospace booked $2.2bn in orders in the quarter, a 1-to-1 book-to-bill on 12.7 percent year-over-year revenue growth. Significant awards in defense portfolios in the quarter included $495m from the U.S. Navy for industrial base development and expansion in support of the Columbia-class ballistic missile submarine program, $360m in contracts to provide intelligence services to classified customers, $270m from the Navy to support the joint U.S. and U.K. development of the submarine Common Missile Compartment and $260m from the U.S. Army for production of munitions. Information Technology posted a strong book-to-bill of 1.2-to-1, driven by a $1bn U.S. Department of State contract to provide global engineering and supply chain services.

24 Jul 19. GD Reports Higher Sales And Earnings In Second Quarter; Raises Guidance. General Dynamics [GD] on Wednesday reported higher second quarter sales on strong gains in four of its five operating segments and earnings were also up on lower taxes and other nonoperating benefits.

Net income increased 3 percent to $806m, $2.77 earnings per share (EPS), from $786m ($2.62 EPS) a year ago, topping analysts’ expectations by 9 cents a share.

Overall segment profits were flat as gains in the Mission Systems, Combat System and Marine Systems segments were offset by declines in Aerospace and Information Technology. Segment operating margin dipped 40 basis points to 11.4 percent.

Sales increased 4 percent to $9.6bn from $9.2bn due to increases at Aerospace, Combat Systems, Mission Systems and Marine Systems. Increased business jet deliveries, increased production for Army M1 Abrams tanks, growth in munitions and armaments, space, intelligence, cyber systems, and shipbuilding work drove the topline gains.

Combat Systems is in good position for continued growth with Army demand for upgraded platforms, particularly for Abrams and the Stryker wheeled vehicle, Phebe Novakovic, GD’s chairman and CEO, said on a call with analysts.

Sales at GD’s IT segment, which combines the company’s legacy IT operations with the former CSRA International that was acquired in April 2018, fell largely due to a number of divestitures last year. These divestitures account for about $1bn in annual sales, Jason Aiken, the company’s chief financial officer, said on the call.

Excluding the divestitures and an acquisition in the Aerospace segment, organic sales topped 4 percent, Novakovic said.

For 2019, GD now expects sales of $39.2 bn versus the prior guidance of around $38.5bn, operating earnings of about $4.6bn, she said. Driving the better than expected sales are growth in IT, Mission Systems, Aerospace and Combat Systems. Per share results are now expected to between $11.85 and $11.90 against the prior outlook of $11.60 to $11.70.

The two-year budget deal reached between the White House and House leadership to lift potential federal budget caps is “very good news” as it “looks like we’ve got some clarity in our political landscape at the moment,” Novakovic said.

Responding to a question from Alembic Global Advisors aerospace and defense analyst Pete Skibitski about the affordability of the Navy’s Columbia-class ballistic missile submarine and if that vessel might crowd out other Navy spending if budgets flatten, Novakovic said the new submarine is a “national priority.”

There is “no doubt” about funding Columbia, she said, noting it can be done in various ways, including possibly creating a special account just like was done in the 1980s for current ballistic missile Ohio-class submarines. She added that there is bipartisan “consensus in Washington” to recapitalize the Navy’s ships, including submarines.

Backlog at the end of the quarter stood at $67.7bn, up from $66.3bn a year ago. Free cash flow was $110 m. GD continues to experience payment delays from the Canadian organization that contracts with the company for light armored vehicles that are in turn supplied to Saudi Arabia.

Aiken said the payment delays remain a timing item and “considerable funding” from the customer is expected in August and GD expects to resolve the balance of funding it is owed by the end of 2019. (Source: Defense Daily)

Lockheed Martin

 

 

 

23 Jul 19.  Lockheed beats quarterly profit estimates, raises 2019 forecast. Lockheed Martin Corp (LMT.N) reported a better-than-expected quarterly profit on Tuesday and raised its 2019 profit forecast for the second time in three months, helped by increased demand for its stealth F-35 combat jets and missiles. The company’s shares rose 2.1% in pre-market trading. Defense stocks have rallied this year following Washington’s hike in defense spending in the budget proposed late last year. Lockheed’s better-than-expected results come at a time the United States has decided to remove Turkey from the advanced F-35 jet program, following its purchase of a Russian missile defense system. (Source: Reuters)

Lockheed Martin Reports Second Quarter 2019 Results

– Net sales of $14.4 bn

– Net earnings of $1.4 bn, or $5.00 per share

– Generated cash from operations of $1.7 bn

– Achieved record backlog of $137 bn

– Increases 2019 outlook for all financial metrics

23 Jul 19. Lockheed Martin Corporation (NYSE: LMT) today reported second quarter 2019 net sales of $14.4bn, compared to $13.4 bn in the second quarter of 2018. Net earnings in the second quarter of 2019 were $1.4bn, or $5.00 per share, compared to $1.2bn, or $4.05 per share, after severance charges of $96m, in the second quarter of 2018. Cash from operations in the second quarter of 2019 was $1.7bn, compared to cash used for operations of $(72) m after pension contributions of $2.0 bn in the second quarter of 2018.

“The corporation achieved another quarter of strong operational and financial results across all four of our businesses, which allowed us to grow our backlog to a new record level and to increase our financial outlook for 2019,” said Lockheed Martin Chairman, President and CEO Marillyn Hewson. “Our team remains focused on driving growth, investing in innovative solutions, and creating long-term value for shareholders.”

Cash Activities

The corporation’s cash activities in the second quarter of 2019 included the following:

* paying cash dividends of $622 m, compared to $570m in the second quarter of 2018;

* repurchasing 0.6 m shares for $219 m, compared to 1.0 m shares for $310m in the second quarter of 2018;

* making capital expenditures of $249m, compared to $264m in the second quarter of 2018;

* making net repayments of $400m for commercial paper, compared to no net repayments in the second quarter of 2018; and

* making no pension contributions, compared to pension contributions of $2.0bn in the second quarter of 2018.

Segment Results

The corporation 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 corporation’s business segments and reconciles these amounts to the corporation’s consolidated financial results.

Net sales and operating profit of the corporation’s business segments exclude intersegment sales, cost of sales, and profit as these activities are eliminated in consolidation. Operating profit of the corporation’s business segments includes the corporation’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 corporation’s business segments also excludes the FAS/CAS 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 significant divestitures, and other miscellaneous corporate activities.

The corporation 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 segment’s net sales and cost of sales. The corporation’s consolidated financial statements must present pension and other postretirement benefit plan expense calculated in accordance with U.S. generally accepted accounting principles (referred to as FAS pension expense). The operating portion of the net FAS/CAS pension adjustment represents the difference between the service cost component of FAS pension expense and CAS pension cost. The non-service FAS pension cost component is included in other non‑operating expense, net on the corporation’s consolidated statements of earnings. The net FAS/CAS pension adjustment increases or decreases CAS pension cost to equal total FAS pension expense (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 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 corporation’s segment sales, operating profit and operating margin may be impacted favorably or unfavorably by changes in profit booking rates on the corporation’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 corporation’s consolidated net adjustments not related to volume, including net profit booking rate adjustments, represented approximately 27 percent of total segment operating profit in the second quarter of 2019 as compared to 32 percent in the second quarter of 2018.

Aeronautics

Aeronautics’ net sales in the second quarter of 2019 increased $229m, or 4 percent, compared to the same period in 2018. The increase was primarily attributable to higher net sales of approximately $205 m for the F-35 program due to increased volume on production, development and sustainment contracts.

Aeronautics’ operating profit in the second quarter of 2019 increased $20m, or 3 percent, compared to the same period in 2018. Operating profit increased approximately $15m for the F-35 program due to increased recurring volume on higher margin production contracts, partially offset by lower risk retirements on production and sustainment contracts. Adjustments not related to volume, including net profit booking rate adjustments and other matters, were $25m lower in the second quarter of 2019 compared to the same period in 2018.

Missiles and Fire Control

MFC’s net sales in the second quarter of 2019 increased $326m, or 16 percent, compared to the same period in 2018. The increase was primarily attributable to higher net sales of approximately $195 m for tactical and strike missile programs due to increased volume (primarily precision fires, new hypersonic missile programs and classified programs); and about $100 m for sensors and global sustainment programs due to increased volume (primarily the Special Operations Forces Global Logistics Support Services (SOF GLSS) and Apache).

MFC’s operating profit in the second quarter of 2019 increased $48m, or 17 percent, compared to the same period in 2018. Operating profit increased approximately $35m for sensors and global sustainment programs due to $65m of charges recorded in the second quarter of 2018 which did not recur for performance matters on the Warrior Capability Sustainment Program and higher volume (primarily SOF GLSS and Apache), partially offset by current period charges of $30 m for performance matters on an international military program and lower risk retirements (primarily Low Altitude Navigation and Targeting Infrared for Night (LANTIRN®) and Sniper Advanced Targeting Pod (SNIPER®)); and about $15m for tactical and strike missile programs due to higher volume (primarily precision fires). Adjustments not related to volume, including net profit booking rate adjustments and other matters, were comparable in the second quarter of 2019 to the same period in 2018.

Rotary and Mission Systems

RMS’ net sales in the second quarter of 2019 increased $202m, or 6 percent, compared to the same period in 2018. The increase was primarily attributable to higher net sales of approximately $190m for integrated warfare systems and sensors (IWSS) programs due to higher volume (primarily Multi Mission Surface Combatant (MMSC), Littoral Combat Ship (LCS), and Aegis Combat System (Aegis)) and about $95m for various training and logistics solutions (TLS) programs due to higher volume. These increases were partially offset by a decrease of approximately $115m for Sikorsky helicopter programs due to lower volume (primarily Black Hawk production, the combat rescue helicopter program and commercial aircraft services).

RMS’ operating profit in the second quarter of 2019 was comparable to the same period in 2018. Operating profit increased approximately $60m for IWSS programs due to higher risk retirements (primarily Radar Surveillance Systems, Aegis and LCS). This increase was partially offset by a decrease of $60m for TLS programs due to a $60m charge for an army sustainment program. Adjustments not related to volume, including net profit booking rate adjustments and other matters, were about $40 m lower in the second quarter of 2019 compared to the same period in 2018.

Space

Space’s net sales in the second quarter of 2019 increased $272m, or 11 percent, compared to the same period in 2018. The increase was primarily attributable to higher net sales of approximately $170m for government satellite programs due to higher volume (primarily Next Generation Overhead Persistent Infrared (Next Gen OPIR); Global Positioning System (GPS) III; and government satellite services) and about $70 m for strategic and missile defense programs due to higher volume (primarily hypersonic programs).

Space’s operating profit in the second quarter of 2019 increased $14m, or 5 percent, compared to the same period in 2018. Operating profit increased approximately $35m for commercial satellite programs, which reflect a lower amount of charges recorded for performance matters; and about $30m for government satellite programs due to higher volume (primarily GPS III and government satellite services) and higher risk retirements (primarily Advanced Extremely High Frequency (AEHF) and GPS III). These increases were partially offset by a decrease of approximately $35m due to lower equity earnings for ULA driven by fewer launches and about $20m for strategic and missile defense programs due to lower risk retirements (primarily Fleet Ballistic Missiles). Adjustments not related to volume, including net profit booking rate adjustments and other matters, were about $15m higher in the second quarter of 2019, compared to the same period in 2018.

Total equity earnings recognized by Space (primarily ULA) represented approximately $15m, or 5 percent, of Space’s operating profit in the second quarter of 2019, compared to approximately $50m, or 18 percent, in the second quarter of 2018.

Income Taxes

The corporation’s effective income tax rate was 15.6 percent in the second quarter of 2019, compared to 18.1 percent in the second quarter of 2018. The rate for the second quarter of 2019 benefited from additional tax deductions based on proposed tax regulations released on March 4, 2019, which clarified that foreign military sales qualify for foreign derived intangible income treatment. The rates for both periods benefited from tax deductions for dividends paid to the corporation’s defined contribution plans with an employee stock ownership plan feature, tax deductions for foreign derived intangible income related to direct commercial sales, tax deductions for employee equity awards, and the research and development tax credit.

Northrop Grumman

 

 

 

 

25 Jul 19. Northrop Grumman Posts Strong Second Quarter With Earnings, Sales Higher. Northrop Grumman [NOC] on Wednesday reported a strong second quarter on higher earnings and sales and strong order flow also drove a substantial increase in the company’s backlog.

Net income increased 9 percent to $861m, $5.06 earnings per share (EPS), from $789m ($4.50 EPS) a year ago, beating consensus estimates by 38 cents per share. Sales increased 19 percent to $8.5bn from $7.1bn.

The primary driver behind the higher sales was the contribution from the former Orbital ATK, which Northrop Grumman acquired last June. Organic sales, were up 4 percent, driven by infrared countermeasures, airborne radar, classified programs, space payloads and mission programs at the Mission Systems segment and F-35 production and a civil space program at the Aerospace Systems segment.

The company’s classified work, as a percent of revenue, is growing across its businesses, Kathy Warden, Northrop Grumman’s president and CEO, said on a call with analysts. The company booked $843m in classified space work during and $4.5 bn in the first quarter, she said.

Overall, orders in the second quartered totaled $13.5bn, fueling an increase in backlog to $63 bn from $57.3bn at the end of the first quarter.

Income at the operating segment level was robust, with all four of the company’s segments contributing, led by the Orbital ATK acquisition, but also due to improved performance on classified programs, improved performance in services work, the absence of a charge for information technology work that dented earnings a year ago under a state and local services contract, and higher sales at Aerospace Systems.

Segment operating margins rose 70 basis points to 11.6 percent.

Based on performance so far this year combined with the outlook for the rest of 2019, Northrop Grumman boosted its adjusted earnings guidance for the year to between $19.30 and $19.55

per share from the prior outlook of between $18.90 to $19.30 per share. The forecast for sales remains around $34 bn.

Warden said that within the Aerospace Systems segment, space business is expected to be the leading growth driver given government budget increases. It will also be “one of the fastest growing segments in the company over time,” she said of the space division.

The outlook for the Aerospace Systems segment remains positive overall with growth expected in programs like the E-2D Hawkeye airborne warning aircraft, F-35, and unmanned aircraft, particularly given the ramp up in the Triton program for the Navy and international sales, Warden said. Free cash flow in the quarter was $1.4 bn. (Source: Defense Daily)

Northrop Grumman Second Quarter 2019 Financial Results

• Net Awards Total $13.5 Bn; Book-to-Bill of 1.6

• Backlog Increases 10 Percent to $63bn

• Sales Increase 19 Percent to $8.5bn

• Operating Income Increases 16 Percent; Segment Operating Income1 Increases 26 Percent

• EPS Increase 12 Percent to $5.06

• Cash from Operations Totals $1.6 Bn; Free Cash Flow1 Totals $1.4bn

• 2019 MTM-adjusted EPS1 Guidance Increased to $19.30 to $19.55

24 Jul 19. Northrop Grumman Corporation (NYSE: NOC) reported second quarter 2019 sales increased 19 percent to $8.5bn from $7.1bn in the second quarter of 2018. Second quarter 2019 net earnings increased 9 percent to $861m from $789m in the second quarter of 2018, and diluted earnings per share increased 12 percent to $5.06 from $4.50, reflecting net earnings growth and a 3 percent reduction in weighted-average diluted shares outstanding.

“We had a strong second quarter fueled by new business captures, sales growth and operating performance,” said Kathy Warden, chief executive officer and president. “Our portfolio is well aligned to our customers’ needs and we see continued demand for our products, as evidenced by our growing sales and backlog. Our continued focus on profitable growth, operational efficiency and agility is generating value for our shareholders.”

Sales

Second quarter 2019 sales increased $1.3bn primarily due to the addition of a full quarter of Innovation Systems sales as well as higher sales at Mission Systems and Aerospace Systems. Operating Income and Margin Rate Second quarter 2019 operating income increased $129m, or 16 percent, primarily due to a $199m increase in segment operating income, partially offset by a $40m increase in unallocated corporate expense, largely due to intangible asset amortization and PP&E step-up depreciation, and a $30m decrease in net FAS (service)/CAS pension adjustment. Operating margin rate declined to 11.2 percent from 11.5 percent primarily due to higher intangible asset amortization and PP&E step-up depreciation, partially offset by improved segment performance. Segment Operating Income and Margin Rate Second quarter 2019 segment operating income increased $199m, or 26 percent, due to higher operating income at all four sectors, including a full quarter of operating income from Innovation Systems. Segment operating margin rate increased to 11.6 percent from 10.9 percent largely due to improved performance at Mission Systems and Technology Services. In addition, segment operating income and margin rate benefited from cost synergies realized in connection with the 2018 acquisition of Orbital ATK. Federal and Foreign Income Taxes The second quarter 2019 effective tax rate decreased to 16.2 percent from 19.2 percent in the second quarter of 2018 primarily due to higher research credits. Net Earnings Second quarter 2019 net earnings increased $72m primarily due to higher operating income and a lower effective tax rate, partially offset by a $58 m decrease in FAS (non-service) pension benefit and a $26m decrease in other, net, principally due to lower interest income. Operating Cash Flows Second quarter 2019 cash provided by operating activities increased $732m to $1.6 bn principally due to improved trade working capital, including recovery of receivables delayed by the ERP conversion discussed in the first quarter of 2019, and higher net earnings. After capital expenditures of $252m, second quarter 2019 free cash flow was $1.4bn. Year to date 2019 cash provided by operating activities increased $56m principally due to higher net earnings, partially offset by an increase in trade working capital.

Awards and Backlog

Second quarter and year to date 2019 net awards totaled $13.5bn and $25.8bn, respectively, and backlog increased to $63.0bn as of June 30, 2019. Significant new awards in the second quarter include $4.1bn for the F-35 program, $3.6bn to deliver an additional 24 E-2D Advance Hawkeye aircraft and related equipment to the U.S. Navy, $843m for space restricted programs, $316m for the Global Hawk program and $265m for the Intermediate Range Conventional Prompt Strike hypersonic program.

Segment Operating Results

AEROSPACE SYSTEMS

Second quarter 2019 sales increased $53m, or 2 percent, due to higher volume on Manned Aircraft and Space programs. Manned Aircraft sales reflect a higher rate of F-35 production activity. Space sales principally reflect higher volume on a civil space program. Autonomous Systems sales were comparable to the prior year period. Operating Income Second quarter 2019 operating income increased $4m, or 1 percent, due to higher sales. Operating margin rate of 10.6 percent was comparable to the prior year period.

INNOVATION SYSTEMS

Second quarter 2019 sales increased $106m, or 8 percent, compared with pro forma sales of $1.4 bn in the second quarter of 2018, principally due to higher sales at Flight Systems and Defense Systems. Flight Systems sales increased due to higher volume on military aerospace structures and launch vehicles. Defense Systems sales reflect higher volume on tactical missiles and subsystems, including the Advanced Anti-Radiation Guided Missile (AARGM) program. Operating Income Second quarter 2019 operating income totaled $169m and operating margin rate was 11.3 percent.

MISSION SYSTEMS

Second quarter 2019 sales increased $254m, or 9 percent, due to higher sales in all three business areas. Sensors and Processing sales increased principally due to higher volume on infrared countermeasures, airborne radar and restricted programs. Advanced Capabilities sales increased due to higher volume on restricted programs. Cyber and ISR sales reflect higher volume on space payloads and mission programs. Operating Income Second quarter 2019 operating income increased $56m, or 16 percent, due to higher sales and a higher operating margin rate. Operating margin rate increased to 13.0 percent from 12.2 percent, primarily due to improved performance on Advanced Capabilities programs.

TECHNOLOGY SERVICES

Second quarter 2019 sales were comparable to the second quarter of 2018, and reflect lower Global Services sales, principally due to the completion in 2018 of a state and local services contract, offset by higher Global Logistics and Modernization volume. Operating Income Second quarter 2019 operating income increased $18m, or 19 percent, and operating margin rate increased to 10.8 percent from 9.1 percent primarily due to improved performance on Global Services programs and the absence in 2019 of a negative EAC adjustment recognized on a state and local services contract in the prior year period.

Guidance

2019 financial guidance reflects the company’s judgment based on the information available to the company at the time of this release. The government budget and appropriations processes can impact our customers, programs and financial results. Government budgets and appropriations, including the timing of appropriations and the occurrence of an extended continuing resolution and/or prolonged government shutdown, as well as a breach of the debt ceiling, can impact the company’s ability to achieve 2019 guidance.

Raytheon

 

 

25 Jul 19. Raytheon Reports Strong Second Quarter 2019 Results.

– Record bookings of $9.5bn; book-to-bill ratio of 1.32

– Strong net sales of $7.2bn, up 8.1 percent

– EPS from continuing operations of $2.92, up 5.0 percent

– Operating cash flow from continuing operations of $823m

– Increased full-year 2019 guidance for sales, EPS and operating cash flow

– Merger activities progressing well for previously announced merger of Raytheon and United Technologies; expected close remains on track for first half of 2020

25 Jul 19. Raytheon Company (NYSE: RTN) today announced net sales for the second quarter 2019 of $7.2 bn, up 8.1 percent compared to $6.6 bn in the second quarter 2018. Second quarter 2019 EPS from continuing operations was $2.92 compared to $2.78 in the second quarter 2018. The increase in the second quarter 2019 EPS from continuing operations was primarily driven by operational improvements and pension-related items, partially offset by a favorable tax-related EPS impact of $0.33 in the second quarter 2018 related to a discretionary pension plan contribution.

“The company had very strong second quarter operating results, with our bookings, sales, operating margin, EPS, and cash flow all exceeding our expectations,” said Thomas A. Kennedy, Raytheon Chairman and CEO. “We begin the second half with continued confidence in our growth outlook given our innovative technologies, breadth of franchises, and record backlog.

“Integration planning for the merger with United Technologies is progressing well, with the integration team developing detailed execution plans to capture revenue and cost synergies rapidly and ensure seamless operations post close. We continue to expect the transaction to close in the first half of 2020.”

Operating cash flow from continuing operations for the second quarter 2019 was $823m compared to $1,156m for the second quarter 2018. The decrease in operating cash flow from continuing operations in the second quarter 2019 was primarily due to the timing of collections. Operating cash flow from continuing operations for the second quarter 2019 was better than the company’s prior guidance.

In the second quarter 2019, the company repurchased 1.7 m shares of common stock for $300m. Year-to-date 2019, the company repurchased 4.4 m shares of common stock for $800 m.

The company had record bookings of $9.5bn in the second quarter 2019, resulting in a book-to-bill ratio of 1.32. Second quarter 2018 bookings were $8.7bn.

Backlog at the end of the second quarter 2019 was a record $43.1bn, an increase of $3.3 bn or 8 percent compared to the end of the second quarter 2018.

Outlook

Segment Results

The company’s reportable segments are: Integrated Defense Systems (IDS); Intelligence, Information and Services (IIS); Missile Systems (MS); Space and Airborne Systems (SAS); and Forcepoint™.

Integrated Defense Systems (IDS)

Integrated Defense Systems (IDS) had second quarter 2019 net sales of $1,641m, up 8 percent compared to $1,514m in the second quarter 2018. The increase in net sales for the quarter was primarily driven by higher net sales on various international Patriot® programs.

IDS recorded $264m of operating income in the second quarter 2019 compared to $262m in the second quarter 2018.

During the quarter, IDS booked $485m and $375m to provide advanced Patriot air and missile defense capability for Romania and the State of Qatar, respectively. IDS also booked $506m for National Advanced Surface-to-Air Missile System (NASAMS™) for Australia; $344 m on the Army Navy/Transportable Radar Surveillance-Model 2 (AN/TPY-2) radar program for the Kingdom of Saudi Arabia; $206 m on the Multi-Function Radio Frequency System (MFRFS) program for the U.S. Army; and $93m to provide engineering support services for an international customer.

Shortly after the quarter close, as previously announced, IDS received a direct commercial contract worth approximately $1.8bn to provide NASAMS to the State of Qatar.

Intelligence, Information and Services (IIS)

Intelligence, Information and Services (IIS) had second quarter 2019 net sales of $1,777m, up 5 percent compared to $1,687m in the second quarter 2018. The increase in net sales for the quarter was primarily driven by higher net sales on classified programs in both cyber and space.

IIS recorded $161m of operating income in the second quarter 2019 compared to $128 m in the second quarter 2018. The increase in operating income for the quarter was primarily driven by higher net program efficiencies.

During the quarter, IIS booked $821 m on a number of classified programs. IIS also booked $146 m on domestic and foreign training programs in support of Warfighter FOCUS activities, and $105m to provide cybersecurity support for an international customer.

Missile Systems (MS)

Missile Systems (MS) had second quarter 2019 net sales of $2,210m, up 8 percent compared to $2,051 m in the second quarter 2018. The increase in net sales for the quarter was primarily due to higher net sales on classified programs, the High-speed Anti-radiation Missile (HARM®) program, and the Phalanx® program.

MS recorded $253m of operating income in the second quarter 2019 compared to $231m in the second quarter 2018. The increase in operating income for the quarter was primarily due to a favorable change in program mix and higher volume.

During the quarter, MS booked $477m for AIM-9X Sidewinder short-range air-to-air missiles for the U.S. Navy, U.S. Air Force and international customers; $232m for Tube-launched, Optically-tracked, Wireless-guided (TOW®) missiles for the U.S. Army, U.S. Marine Corps and international customers; $200 m for Excalibur® for the U.S. Army; $190m for the Coyote® Rapid Development Program (CRDP) for a U.S. customer; $120m for StormBreaker™ for the U.S. Air Force; and $101 m for HARM for the U.S. Air Force and international cuSpace and Airborne Systems (SAS) had second quarter 2019 net sales of $1,817 m, up 13 percent compared to $1,605m in the second quarter 2018. The increase in net sales for the quarter included higher net sales on classified programs, the Next Generation Overhead Persistent Infrared (Next Gen OPIR) program, and an international tactical radar systems program.

Space and Airborne Systems (SAS)

SAS recorded $229m of operating income in the second quarter 2019 compared to $206m in the second quarter 2018. The increase in operating income for the quarter was primarily due to higher volume.

During the quarter, SAS booked $218m for radar components for the U.S. Navy; $93 m for the Multi-Spectral Targeting System (MTS) for the U.S. Air Force; $88 m for radar warning receivers for the U.S. Air Force; and $77m for missile seekers for the U.S. Navy and an international customer. SAS also booked $876m on a number of classified contracts.

Forcepoint™

Forcepoint had second quarter 2019 net sales of $156m, up 5 percent compared to $148m in the second quarter 2018.

Forcepoint recorded a loss of $3m in the second quarter 2019 compared to a loss of $8m in the second quarter 2018.

United Technologies

 

 

23 Jul 19. United Tech profit beats on aircraft parts demand after MAX grounding. United Technologies (UTX.N) on Tuesday raised its full-year sales and profit forecasts, aided by an increase in demand for its aircraft maintenance parts and services as airlines grapple with overworked planes due to the grounding of Boeing’s MAX jets.

FILE PHOTO: United Technologies logo is displayed on a screen at the post where it’s stock is traded on the floor of the New York Stock Exchange (NYSE) in New York, U.S., September 5, 2017. REUTERS/Brendan McDermid

Shares of UTC, which makes the Pratt & Whitney aircraft engines and is on track to spin off its Otis elevator and Carrier air conditioner units, rose as much as 2.7% in morning trade.

UTC is among the first aero parts supplier to signal gains from the Boeing groundings, which has otherwise rattled the aerospace sector as more than 300 737 MAX passenger planes have been taken out of service, leaving several airlines to deal with thousands of flight cancellations and reschedules.

“There is impetuous on the airlines and the (maintenance and repair) shops to ensure that the existing fleet is in a ready to fly state,” UTC Chief Financial Officer Akhil Johri told Reuters, talking about the MAX grounding.

“In that environment, the (repair) shops and the airlines are ensuring that they have the parts supply available and that is definitely helping (UTC).”

UTC said sales in its Collins aerospace unit, which makes engine components, landing gear, wheels and brakes, and interior and exterior aircraft lighting, surged about 66% percent to $6.58 bn in the second quarter.

The unit is UTC’s biggest and is also benefiting from the acquisition of aero parts maker Rockwell Collins.

Johri added that growth in the unit will slow in the second half compared with the first, as stocking of spare parts by airlines and shops eases with the possibility of MAX returning to the sky.

UTC said it expects its acquisition of Rockwell to add an extra $150 m sales and 15 cents per share to its profit in 2019.

That helped the company raise its current-year adjusted earnings per share outlook to a range of $7.90 to $8.05, from $7.80 to $8.00.

UTC now expects full-year adjusted sales to rise between 4% and 5%, up from 3% and 5% forecast previously.

“The guide was tweaked up more than we had been expecting,” J.P. Morgan analyst Stephen Tusa wrote in a note.

UTC reported earnings per share of $2.20 for the quarter ended June 30, beating the average analyst estimate of $2.05, according to IBES data from Refinitiv.

The company’s net sales rose 17.5% to $19.63bn, above Wall Street expectation of $19.55bn.

United Technologies Reports Second Quarter 2019 Results; Raises 2019 Organic Sales And Adjusted EPS Outlook

* Strong sales and operating profit drive United Technologies’ performance in Q2; Recently acquired Rockwell Collins continues to exceed expectations

* Sales of $19.6 bn, up 18 percent versus prior year including 6 percent organic growth

* GAAP EPS of $2.20, down 14 percent versus prior year driven by the absence of the Taylor divestiture gain in Q2 2018

* Adjusted EPS of $2.20, up 12 percent versus prior year

23 Jul 19. United Technologies Corp. (NYSE: UTX) reported second quarter 2019 results and increased its full year organic sales and adjusted EPS outlook for 2019.

“United Technologies delivered strong second quarter results,” said UTC Chairman and Chief Executive Officer Gregory Hayes. “Based on a solid first half, we feel confident raising our outlook for the full year with an improved organic sales growth outlook of 4 to 5 percent and adjusted EPS range of $7.90 to $8.05.* We continued to see outperformance at Collins Aerospace this quarter as we made significant progress on the integration of Rockwell Collins, which more than offset softness in Carrier’s end markets.”

Hayes continued, “Looking ahead, we remain on track to establish Otis and Carrier as independent companies in the first half of 2020. We are also excited about the transformational merger with Raytheon that we announced in June, which will create a leading, platform-agnostic aerospace and defense systems company. The combination will enhance our ability to provide high technology systems that meet the increasingly complex needs of our customers in rapidly growing segments of the industry.”      

Second quarter sales of $19.6bn were up 18 percent over the prior year, including 6 points of organic sales growth and 13 points of acquisition benefit offset by 1 point of foreign exchange headwind. GAAP EPS of $2.20 was down 14 percent versus the prior year and included 6 cents of net nonrecurring gains and 6 cents of restructuring charges. Adjusted EPS of $2.20 was up 12 percent.

Net income in the quarter was $1.9bn, down 7 percent versus the prior year. Cash flow from operations was $2.1 bn and capital expenditures were $467m, resulting in free cash flow of $1.6bn.

In the quarter, Collins Aerospace commercial aftermarket sales were up 75 percent and up 18 percent organically. Collins Aerospace commercial aftermarket sales were up 16 percent on a pro forma basis including Rockwell Collins. Pratt & Whitney commercial aftermarket sales were up 2 percent. Equipment orders at Carrier were down 12 percent organically. Otis new equipment orders were down 6 percent at constant currency in the quarter and down 1 percent on a rolling twelve month basis.

UTC updates its 2019 outlook and now anticipates:

* Adjusted EPS of $7.90 to $8.05, up from $7.80 to $8.00;*

* Organic sales growth of 4 to 5 percent, up from 3 to 5 percent;*

* There is no change in the Company’s previously provided 2019 expectations for sales of $75.5 to $77.0bn and free cash flow of $4.5 to $5.0bn, including $1.5bn of one-time cash payments related to the portfolio separation.*

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