Northrop Grumman Corporation (NOC)

Northrop Grumman Corporation Q1 2025 Financial Report

Report Date: 2025-04-29
Period Covered: Q1 2025 (Quarter ended March 31, 2025)

Executive Summary

• Revenue: $9.468 billion, down 6.6% YoY
• Operating Income: $0.573 billion, margin 6.1% (vs. 10.6% in Q1 2024)
• Net Earnings: $0.481 billion ($0.332 diluted EPS), down 49% YoY
• Long-Term Debt (net of current maturities): $14.167 billion, down 3.6% QoQ
• Backlog: $92.8 billion, up 1.5% QoQ

Profit & Loss Analysis

• Primary Drivers of Decline:
  • $0.477 billion unfavorable EAC adjustment on the B-21 program (LRIP lots)
  • Higher nonoperating pension expense (+$0.130 billion)
  • Increased interest expense (+$0.010 billion)
• Tax Rate: 16.8% vs. 16.5% in Q1 2024, impacted by R&D credits and unrecognized tax benefits
• Segment Highlights:
  • Aeronautics Systems: Sales down 7.6%, operating loss widened by $0.123 billion
  • Defense Systems: Sales up 4.0%, operating income up 14.7% margin 9.9%
  • Mission Systems: Sales up 5.3%, margin compressed to 12.9% from 14.2%
  • Space Systems: Sales down 18.5%, margin improved slightly to 11.0%

Debt & Liquidity

• Long-Term Debt (net): $14.167 billion (current maturities $0.605 billion)
• Commercial Paper: $15 billion outstanding
• Cash & Equivalents: $1.685 billion
• Credit Facility: $25 billion senior unsecured line maturing Aug 2027, fully compliant
• Free Cash Flow: –$1.821 billion (reflecting working capital build and timing of collections)

Pros & Cons

Pros:

• Strong $92.8 billion backlog (40% deliverable next 12 months)
• Leadership in high-priority defense programs (B-21, Sentinel, IBCS)
• Diversified customer base (87% U.S. government, 13% international/commercial)

Cons:

• B-21 cost overruns driving material loss provisions
• Margin pressure from supply-chain inflation and labor costs
• Budgetary uncertainty amid continuing resolutions and global tensions
• Elevated working capital usage in Q1 impacting cash flow

• Total Q1 2025 Revenue: $9.468 B (Product $7.521 B; Service $1.947 B)
• By Segment: • Aeronautics Systems: $2.814 B (–7.6% YoY); Op Income –$0.183 B (–59.9%) • Defense Systems: $1.805 B (+4.0%); Op Income $0.179 B (+14.7%) • Mission Systems: $2.807 B (+5.3%); Op Income $0.361 B (–4.5%) • Space Systems: $2.568 B (–18.5%); Op Income $0.283 B (–14.2%)
• Contract Type: 52.9% cost-type; 47.1% fixed-price
• Customer Mix: 87% U.S. government; 13% international/commercial
• Backlog: $92.8 B at 3/31/25 vs. $91.5 B at 12/31/24

Northrop Grumman remains fundamentally strong, backed by a $92.8 billion backlog and leading positions in advanced defense platforms. Near-term profitability is challenged by cost overruns on the B-21 and macro-driven inflation in labor/materials. Liquidity is robust, with $1.685 billion in cash and full access to a $25 billion credit facility. Execution on key programs, supply-chain mitigation, and favorable contract renegotiations will be critical. Continued geopolitical tension supports long-term demand, but budgetary and regulatory uncertainty and program cost management are risks to watch in 2025.