B-21 headwind raids Northrop Grumman's Q4 earnings
By Pratyush Thakur and Mike Stone
(Reuters) -Northrop Grumman on Thursday said it swung to a loss in the fourth quarter from a year-earlier profit as it took a $1.17 billion charge related to the U.S. Air Force's next-generation B-21 stealth bomber.
Shares of the Falls Church, Virginia-based company, which lost around 15% of their value in 2023, were trading down 6.2% in New York.
The B-21 Raider started flight tests during the fourth quarter, after which the U.S. Air Force awarded Northrop (NYSE:NOC) a low-rate initial production (LRIP) contract for the bomber on a fixed-price basis.
«We believe it is probable each of the first five LRIP lots will be performed at a loss,» Northrop said. The number of aircraft in those lots is unknown.
However, the B-21 program, which will ultimately yield more than 100 bombers, has most of its production covered under a cost-plus contract, which means it will reimburse the company for the extra expenses it incurs due to inflation.
The B-21 Raider, replacing the aging B-2, is a key weapon in the Pentagon's strategy to counter China.
Northrop reported adjusted free cash flow of $1.63 billion for the fourth quarter, better than Wall Street analysts' estimates of $1.58 billion, according to LSEG data.
«We generated free cash flow at the high end of our guidance range, significantly exceeded our sales guidance, and beat EPS consensus absent the B-21 charge we identified as a possibility this time last year,» Chief Executive Kathy Warden said in a statement.
While the B-21 making Aeronautics division reported a 44% decline in operating margin, the continued ramp-up in development programs, primarily the Ground-Based Strategic Deterrent (GBSD), boosted the margin in the Space Systems
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