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
|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|
|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|
- 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.
- 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.
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
|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 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.
- 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.
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
- 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.
- 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.
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
|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|
- 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.
- 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.
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
|Key Executive Compensation|
|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|
Kathy J. Warden/Chairman of the Board, President and CEO
|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|
Kenneth L. Bedingfield/Former Corporated VP and CFO
|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|
Janis Pamiljans/Corporate VP and President, Aerospace Systems
|Annual Other Income||0||0||0|
|Restricted Stock Award||3,499,941||3,500,008||3,499,779|
Mark A. Caylor/Corporate VP and President, Mission Systems
|Annual Other Income||0||0|
|Restricted Stock Award||3,900,096||3,499,779|
Christopher T. Jones/Corporate VP and President, Technology Services
|Annual Other Income||0|
|Restricted Stock Award||3,000,163|
- 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.
- 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.
Total executive compensation includes salary, restricted stock award, non-equity compensation and other compensation.
6. NOC LOBBYING AND CONTRIBUTIONS
Northrop Grumman Corp is incurring lobbying and contributions from 1998 to the present date.
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.”
The amount of lobbying and contributions spent by Northrop Grumman Corp. varies per cycle.
7. NOC FINANCIAL STRENGTH
|Market value of equity||$54,330,100,000|
|Book value of total liabilities||$32,270,000,000|
|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|
Formula: Z-Score = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E
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.
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.
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.
Researched and written by Criselda