Northrop Grumman’s stock experienced significant sell-offs on Tuesday following the release of the company’s first-quarter results. By noon ET, the stock had declined by 11.4%, contrasting with a 1.9% gain in the S&P 500.
The company reported its first-quarter results prior to the market opening, revealing that both sales and earnings failed to meet Wall Street’s projections. Additionally, Northrop Grumman adjusted its full-year performance targets downward.
The company’s earnings per share (EPS) for the quarter were $6.06 on sales of $9.47 billion, falling short of analyst expectations, which anticipated EPS of $6.26 on sales of $9.94 billion. Year over year, revenue dropped by 7%, affected by weaker performance in space systems and aeronautics systems.
While the defense systems segment saw a 4% sales increase, driven by products like the Sentinel intercontinental ballistic missile, the aeronautics segment encountered an 8% decrease in sales due to reduced demand for the B-21 bomber and other factors. The space segment’s sales declined by 18% in comparison to the same quarter last year, attributed to lower demand in classified projects and next-generation missile programs.
In its first-quarter report, Northrop Grumman’s management reaffirmed its full-year sales guidance of $42 billion to $42.5 billion and projected free cash flow of $2.85 billion to $3.25 billion. Although these forecasts remained unchanged, the company revised its full-year earnings guidance, now expecting EPS between $24.95 and $25.35, which is down from a previous range of $27.85 to $28.25.
The combination of performance shortfalls and a significantly reduced earnings outlook has prompted some investors to reevaluate Northrop Grumman’s prospects. Although the company had gained attention as a potential leader in the space industry, the underwhelming performance of its space segment last quarter may dampen enthusiasm unless a positive catalyst emerges.
Keith Noonan, the author of the original article, and The Motley Fool do not hold any positions in the stocks mentioned. The Motley Fool has a disclosure policy.
