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Northrop Grumman Corporation (NOC) Extended Graph Analysis

June 3rd, 2020 Posted by Extended Analysis No Comment yet

Company Profile

NOC logo

Northrop Grumman Corporation (NOC) is an American Corporation that provides solutions in space,  aeronautics, defense and cyberspace worldwide. It is the third defense company in the US and the number two provider of information technology to the federal government and is the largest naval shipbuilder in the world. The company also provides information technology solutions to the government and commercial clients.

NOC was founded in 1994 in Denver, Colorado, United States, headquartered in Falls Church, Virginia, US. The company has more than 90,000 employees as of 2020.

 

Northrop Grumman Corporation (NOC) Extended Graph Analysis

 

1. NOC CASH FLOW

NOC CASH FLOW

2015 2016 2017 2018 2019 2020
Net cash flow provided by operating activitIes 2,162,000,000 2,813,000,000 2,613,000,000 3,827,000,000 4,297,000,000 4,217,000,000
Net cash used for investing activities -431,000,000 -805,000,000 -889,000,000 -8,878,000,000 -1,207,000,000 -1,197,000,000
Net cash provided by (used for) financing activities -3,275,000,000 -1,786,000,000 6,960,000,000 -4,595,000,000 -2,424,000,000 -590,000,000
Capital expenditure -471,000,000 -920,000,000 -928,000,000 -1,249,000,000 -1,264,000,000 -1,252,000,000
Free cash flow 1,691,000,000 1,893,000,000 1,685,000,000 2,578,000,000 3,033,000,000 2,965,000,000
Working Capital 877,000,000 1,226,000,000 9,384,000,000 1,406,000,000 1,251,000,000 1,251,000,000


Facts:

  • Cash provided by operating activities was $4.2 billion in 2020.
  • Cash used for investing activities was -$1.2 billion in 2020.
  • Cash provided by (used for) financing activities was -$590 million in 2020.
  • Capital expenditures were -$1.252 billion in 2020.
  • Free cash flow was $3 billion in 2020.
  • Working capital was $1.251 in 2020.

Explanation

  • Cash flow from operations grew 95 percent in five years.
  • Cash from investing activities was investment in property, plant and equipment.
  • Net cash provided by (used for) financing activities were debt repayment, common stock repurchased, dividends paid and other financing activities.
  • Capital expenditure was investment in property, plant and equipment.
  • Free cash flow grew 75 percent in five years. 
  • Working capital grew 45 percent in five years.

Interpretation

The company was able to generate cash from operations in the last five years. There was free cash flow and working capital in the last five years.

 

2. NOC BALANCE SHEET

NOC BALANCE SHEET

2015 2016 2017 2018 2019
Total cash 2,319,000,000 2,541,000,000 11,225,000,000 1,579,000,000 2,245,000,000
Current Assets 6,334,000,000 6,856,000,000 16,349,000,000 9,680,000,000 10,685,000,000
Net property, plant and equipment 3,064,000,000 3,588,000,000 4,225,000,000 6,372,000,000 8,423,000,000
Total non-current assets 18,120,000,000 18,758,000,000 18,568,000,000 27,973,000,000 30,404,000,000
Total assets 24,454,000,000 25,614,000,000 34,917,000,000 37,653,000,000 41,089,000,000
Current liabilities 5,457,000,000 5,630,000,000 6,965,000,000 8,274,000,000 9,434,000,000
Non-current liabilities 13,475,000,000 14,725,000,000 20,904,000,000 21,192,000,000 22,836,000,000
Total liabilities 18,932,000,000 20,355,000,000 27,869,000,000 29,466,000,000 32,270,000,000
Retained earnings 10,661,000,000 10,630,000,000 11,548,000,000 8,068,000,000 8,748,000,000
Stockholders equity 5,522,000,000 5,259,000,000 7,048,000,000 8,187,000,000 8,819,000,000

Facts:

  • Total cash was $2.2 billion in 2019.
  • Current assets were $10.7 billion in 2019.
  • Net property, plant and equipment was $8.4 billion in 2019.
  • Non-current assets were $30.4 billion in 2019.
  • Total assets were $41 billion in 2019.
  • Current liabilities were $9.4 billion in 2019.
  • Non-current liabilities were $23 billion in 2019.
  • Total liabilities were $32 billion in 2019.
  • Retained earnings were $8.7 billion in 2019.
  • Stockholders equity was $8.8 billion in 2019.

Explanation

  • Total cash represents 5 percent of total assets and 21 percent of current liabilities.
  • Current assets grew 67 percent and represent 26 percent of total assets.
  • Net property, plant and equipment grew 175 percent and it represents 21 percent of total assets.
  • Non-current assets grew 68 percent in five years and it represents 74 percent of total assets.
  • Total assets grew 68 percent in five years.
  • Current liabilities represent 29 percent of total liabilities.
  • Non-current liabilities represent 71 percent of total liabilities.
  • Total liabilities represent 79 percent of total liabilities and stockholders equity.
  • Retained earnings represents 99 percent of total stockholders equity.
  • Stockholders equity represents 21 percent of total liabilities and stockholders equity.

Interpretation

The company has enough resources to meet its current obligations. The company is using borrowed money more than the investor’s investment in the operation of its business.

 

3. INCOME AND MARKET

NOC INCOME AND MARKET

2015 2016 2017 2018 2019 2020
Revenue 23,526,000,000 24,508,000,000 25,803,000,000 30,095,000,000 33,841,000,000 34,272,000,000
EBIT 3,076,000,000 3,193,000,000 3,299,000,000 3,780,000,000 3,969,000,000 3,967,000,000
Net Income 1,990,000,000 2,200,000,000 2,015,000,000 3,229,000,000 2,248,000,000 2,253,000,000
EBITDA 3,558,000,000 3,680,000,000 3,884,000,000 5,104,000,000 4,094,000,000 4,095,000,000
Intrinsic Value 36,610,000,000 54,474,519,777 89,267,000,000 79,353,016,543 178,677,000,000 354,091,000,000
Market Capitalization 34,232,000,000 40,995,000,000 53,426,000,000 41,782,000,000 57,735,000,000 55,124,000,000

Facts:

  • Revenue was $34 billion in 2020.
  • EBIT was $39.7 billion in 2020.
  • Net income was $2.3 billion in 2020.
  • EBITDA was $4 billion in 2020.
  • Intrinsic value was $354 billion the trailing twelve months 2020.
  • Market capitalization was $55 billion in the trailing twelve months 2020.

Explanation:

  • Revenue increased 46 percent in five years. 
  • EBIT increased 29 percent in five years and it represents 12 percent of revenue.
  • Net income grew 13 percent in five years and it represents 7 percent of total revenue.
  • EBITDA increased 15 percent of the revenue and it represented 12 percent of revenue.
  • Intrinsic value was greater by more than 500 percent of the market capitalization.
  • Market capitalization is only 16 percent of the intrinsic value.

Interpretation

Revenue and EBIT was increasing year-over-year and was capable of producing a fair net profit. Its earning per share was 13.38 in the trailing twelve months of 2020. NOC has a stable balance sheet.

 

4. NOC FINANCIAL RATIOS

NOC FINANCIAL RATIOS

2015 2016 2017 2018 2019 2020
Asset turnover (average) 0.92 0.97 0.85 0.83 0.86 0.83
Return on assets % 7.80 8.79 6.66 8.90 5.71 5.43
Return on equity % 31.20 40.81 32.75 42.39 26.44 25.31
Return on invested capital % 17.57 20.01 13.35 17.07 12.07 10.42
Debt/Equity 1.16 1.34 2.04 1.70 1.60 1.72

Facts:

  • Asset turnover was averaging 0.83 in 2020 trailing twelve months.
  • Return on assets was 5.43 percent in 2020 trailing twelve months.
  • Return on equity was 25.31 percent in 2020 trailing twelve months.
  • Return on invested capital was 10.42 percent in 2020 trailing twelve months.
  • Debt/Equity ratio was 1.72 in 2020 trailing twelve months.

Explanation

  • Asset turnover indicates that for every dollar invested in assets it generated 83 cents of sales.
  • Return on assets indicates that for every dollar invested in assets it generated 5.43 cents of net income.
  • Return on equity indicates that for every dollar invested in stockholders equity it generated a return of 0.2531 cents of net income.
  • Return on invested capital indicates that the company generated a return of 0.4142 cents per share.
  • Debt/Equity ratio means that the company has $1.72 in debt for every dollar invested in equity. Debt level is 172 percent of equity.

Interpretation

The company is efficient in using its assets to generate a good sales and return on net income. Financial ratios show a good return on the invested capital. The company is profitable.

 

5. NOC KEY EXECUTIVE COMPENSATION

NOC KEY EXECUTIVE COMPENSATION

  2015 2016 2017 2018 2019
Key Executive Compensation     
Salary 1,386,154 1,529,039 2,299,931 3,391,347 4,783,904
Bonus 0 0 100,000 0 0
Annual Other Income 0 0 0 0 0
Restricted Stock Award 6,200,145 6,499,836 10,250,040 20,899,981 26,499,659
Securities Options 0 0 0 0 0
LTIP Payout 0 0 0 0 0
Non-Equity Compensation 1,654,000 2,504,000 2,963,000 5,880,000 10,044,000
Other Compensation 622,561 480,320 1,590,371 1,139,525 11,631,569
Total 9,883,642 11,213,415 17,960,756 31,310,853 46,384,546
Kathy J. Warden/Chairman of the Board, President and CEO 
Salary 701,077 772,500 807,116 963,462 1,488,462
Bonus 0 0 0 0 0
Annual Other Income 0 0 0 0 0
Restricted Stock Award 3,200,053 3,499,856 3,499,993 9,999,869 13,000,159
Securities Options 0 0 0 0 0
LTIP Payout 0 0 0 0 0
Non-Equity Compensation 814,000 1,272,000 1,061,000 1,920,000 4,509,000
Other Compensation 425,783 165,596 206,548 458,976 622,758
Total 5,161,675 5,910,172 5,962,672 13,342,307 20,307,994
Kenneth L. Bedingfield/Former Corporated VP and CFO    
Salary 685,077 756,539 790,192 811,154 834,385
Bonus 0 0 0 0 0
Annual Other Income 0 0 0 0 0
Restricted Stock Award 3,000,092 2,999,980 3,250,106 3,500,008 3,499,779
Securities Options 0 0 0 0 0
LTIP Payout 0 0 0 0 0
Non-Equity Compensation 840,000 1,232,000 1,041,000 1,304,000 1,401,000
Other Compensation 196,798 314,724 351,426 312,214 296,756
Total 4,721,967 5,303,243 5,432,724 5,927,376 6,031,920
Janis Pamiljans/Corporate VP and President, Aerospace Systems    
Salary 702,623 826,154 850,192
Bonus 100,000 0 0
Annual Other Income 0 0 0
Restricted Stock Award 3,499,941 3,500,008 3,499,779
Securities Options 0 0 0
LTIP Payout 0 0 0
Non-Equity Compensation 861,000 1,328,000 1,428,000
Other Compensation 1,032,397 241,318 356,125
Total 6,565,360 5,895,480 7,222,256
Mark A. Caylor/Corporate VP and President, Mission Systems 
Salary 790,577 850,192
Bonus 0 0
Annual Other Income 0 0
Restricted Stock Award 3,900,096 3,499,779
Securities Options 0 0
LTIP Payout 0 0
Non-Equity Compensation 1,328,000 1,428,000
Other Compensation 127,017 129,727
Total 6,145,690 6,794,344
Christopher T. Jones/Corporate VP and President, Technology Services 
Salary 790,673
Bonus 0
Annual Other Income 0
Restricted Stock Award 3,000,163
Securities Options 0
LTIP Payout 0
Non-Equity Compensation 1,278,000
Other Compensation 226,203
Total 6,028,032

Facts:

  • Total key executive compensation was $9,883,642 in 2015.
  • Total key executive compensation in 2016 was $11,213,415.
  • Key executive compensation in 2017 was $17,960,756.
  • Key executive compensation in 2018 was $31,310,853.
  • Executive compensation in 2019 was $46,384,546.

Explanation

  • Total key executive compensation represents 2 percent of the net income in 2019
  • Kathy J. Warden, CEO total compensation represents 44 percent of the total key executive compensation in 2019.
  • Kenneth L Bedingfield, CFO total compensation represents 13 percent of the total key executive compensation.
  • Janis Pamiljans, VP and President Aerospace System total compensation in 2019 represents 16 percent of total key executive compensation.
  • Mark A. Caylor, Corporate VP and President, Mission Systems total compensation for 2019 represents 15 percent of the total executive compensation.
  • Christopher T. Jones, Corporate VP and President, Technology Services total salary represents 13 percent of total key executive compensation compensation.

Interpretation

Total executive compensation includes salary, restricted stock award, non-equity compensation and other compensation.

 

6. NOC LOBBYING AND CONTRIBUTIONS

NOC LOBBYING ND CONTRIBUTIONS

PERIOD USD LOBBYING CONTRIBUTIONS
1998 6,120,000 6,120,000
1999 5,130,000 5,130,000
2000 7,000,000 7,000,000
2001 12,510,000 12,510,000
2002 11,770,000 11,770,000
2003 10,410,000 10,410,000
2004 12,650,000 12,650,000
2005 13,720,000 13,720,000
2006 16,830,000 16,830,000
2007 11,180,000 11,180,000
2008 20,930,000 20,930,000
2009 15,180,000 15,180,000
2010 15,740,000 15,740,000
2011 12,770,000 12,770,000
2012 20,437,387 17,540,000 2,897,387
2013 20,590,000 20,590,000
2014 14,271,739 10,216,960 4,054,779
2015 11,020,000 11,020,000
2016 16,284,706 12,050,000 4,234,706
2017 14,460,000 14,460,000
2018 19,987,039 14,390,000 5,597,039
2019 17,314,233 13,620,000 3,694,233
2020 13,620,000 13,620,000

Facts:

Northrop Grumman Corp is incurring lobbying and contributions from 1998 to the present date.

Explanation:

A note from Center for Responsive Politics, OpenSecrets.org, quoted as follows:

“Campaign finance totals for the current election cycle were released by the FEC on May 21, 2020 and by the IRS on April 03, 2019, lobbying data was released by the Senate Office of Public Records on March 19, 2019, outside spending data was released by the FEC on May 29, 2020, and personal finances data was released by the House, Senate, and US Office of Government Ethics starting in June 2011.”

Interpretation

The amount of lobbying and contributions spent by Northrop Grumman Corp. varies per cycle.

 

7. NOC FINANCIAL STRENGTH

NOC FINANCIAL STRENGTH

DATA

Working Capital $1,251,000,000
Total Assets $41,089,000,000
Sales $34,272,000,000
EBIT $3,967,000,000
Market value of equity $54,330,100,000
Book value of total liabilities $32,270,000,000
Retained earnings $8,748,000,000

CALCULATION

Ratio Score Result
A – Working Capital / Total Assets 0.03 1.2 0.04
B – Retained Earnings / Total Assets 0.21 1.4 0.30
C – EBIT / Total Assets 0.10 3.3 0.32
D – Market Value of Equity / Book Value of Total Liabilities 1.68 0.6 1.01
E – Sales / Total Assets 0.83 1 0.83
Z-Score 2.50


Formula: Z-Score = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E

 

Explanation:

Z-Score is a statistical measurement that compares data points from different sets of data to find correlations. This measurement by Dr. Edward Altman is a significant measure in determining the financial strength of the company because it relies on different weighted financial liquidity and profitability metrics to come up with the overall score. This measure indicates the probability of bankruptcy.

Interpretation

The calculated Z-Score of Northrop Grumman was 2.50.Dr. Altman’s grading scale of below 3.0 indicates that the company is likely to declare bankruptcy in near future. Altman score weights different profitability and liquidity metrics to arrive at the overall score. It is then compared to his grading scale. The formula does not reflect cash flows, the company might be able to pay liabilities however, may have difficulty in the operations and may gradually lead to insolvency.

Overview

Northrop Grumman Corporation is financially strong due to its innovative and advanced technology solutions. The company focused on high technology solutions for its customers. The company was able to solve critical problems in space, aeronautics, defense and cyberspace.

CITATION

https://www.northropgrumman.com/

https://www.morningstar.com/stocks/xnys/noc/quote

https://www.opensecrets.org/orgs/summary?id=D000000170

Researched and written by Criselda

Note:

Research Reports can be found under the company tab.