Northrop Grumman headquarters in Falls Church, Virginia. Photo: Northrop Grumman.

Northrop Grumman reported strong second quarter financial results on July 29, led by a number of programs in its Space Systems and Mission Systems segments. The company again raised its top and bottom-line guidance for the year.

Net income increased 3% to $1.04 billion, $6.42 earnings per share from $1.01 billion ($6.01 EPS) a year ago, smashing consensus estimates of $5.85 by 57 cents per share. Federal taxes were higher in the quarter. Sales also increased 3% to $9.2 billion from $8.9 billion.

The top and bottom-line results were impacted by the sale earlier this year of Northrop Grumman’s information technology (IT) solutions business to the private equity firm Veritas Capital. Excluding results from that business, organic revenue climbed 10% in the quarter.

Space Systems, the company’s fastest growing segment, led the charge, posting strong double-digit gains in sales, up 34%, and operating profit, up 44%. Northrop Grumman cited various programs in the segment for the results including the Ground Based Strategic Deterrent (GBSD) ICBM and Next-Generation Interceptor missile defense development efforts, NASA’s Commercial Resupply Services to the space station and Artemis lunar programs, hypersonic and classified programs, the Next Generation Overhead Persistent Infrared satellite program and risk retirements.

Asked on the company’s earnings call why sales and profit in the Space Systems segment are expected to decelerate in the second half of the year, Kathy Warden, chairman, president and CEO, replied that “This business has exceeded our expectations frankly since it was stood up 19 months ago and we aren’t betting against it in the second half but generally we don’t forecast that kind of success that the business is having, but we certainly strive to deliver it and that’s what the team has been doing all year to this point.”

The space business is a combination of legacy Northrop Grumman capabilities and a portion of the former Orbital ATK business that it acquired in June 2018.

The increases at Space and Mission Systems more than offset declines at Defense Systems, which suffered from the IT business divestiture and the close out of an Army ammunition contract, and flattish results in the Aerospace Systems segment.

Strong results in the first half of the year combined with an improved outlook for the second half led the company to raise its guidance for 2021. Sales are now forecast to be between $35.8 billion and $36.2 billion, $500 million above the prior outlook.

Adjusted earnings are now expected to be between $24.40 and $24.80 EPS, up from the previous projection of $24 to $24.50. The increase is largely being driven by operating improvements.

Northrop Grumman notched $6.5 billion in orders in the quarter and backlog at the end of June stood at $76.6 billion, down 5% from $81 billion at the end of 2020. Adjusted free cash flow in the quarter was $1.2 billion, which included a $390 million gain from the sale of the IT business.

This article was originally published by our sister publication Defense Daily.