McAleese & Associates: Northrop Posts 16% Sales Growth Driven by Aerospace, Innovation Systems Segments

Jim McAleese

Consulting firm McAleese and Associates has released a report that provides an overview of the financial performance of Northrop Grumman (NYSE: NOC) during the fourth quarter and full year 2018.

Northrop saw its 2018 sales jump 16 percent to $30B driven by sales growth at its innovation systems business and aerospace systems segment.

Jim McAleese, founder and partner at McAleese & Associates and a 2019 Wash100 winner, wrote that the company’s aerospace systems sector recorded an 8 percent rise in 2018 sales attributed to the U.S. Air Force’s B-21 bomber program.

According to the report, Northrop CEO Kathy Warden expects B-21 growth to resume by 2022 or 2023 for low-rate initial production.

Kathy Warden

“Our business cycle, particularly with AS [aerospace systems sector]…tend to be beyond 3-5 years…When we win a large program, it takes time for us to ramp up to a normalized-state of revenue for development, and that tends to plateau a bit, before we get into the production phase, where there is another ramp-up process…[Y]ou are really talking about five-plus years,” Warden said Thursday during the company’s earnings call.

The defense contractor’s aerospace systems sector reported a 12 percent increase in Q4 profit driven by the B-21 critical design review that occurred during the quarter. The company also saw its 2018 sector operating profit increase 19 percent to $3.4B.

Warden plans to expand the missile defense workshare as a growth engine for its innovation systems and mission systems segments, the report noted.

She targets the innovation systems segment for “revenue-synergy” growth across four areas: space; missile defense and hypersonics offense; 2020 downselection for the U.S. Air Force’s $63B Ground Based Strategic Deterrent program; and counter-hypersonics.

Warden, a 2019 Wash100 recipient, also cited the consolidation of two businesses within the company’s technology services sector into a single entity – global services – focused on cybersecurity, health care, intelligence, data analytics and other high-end IT services.

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