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

Northrop Grumman’s Space Systems segment continued its growth streak in the third quarter of 2021 with a 22% sales increase compared to the same time period in 2020. Space Systems was the only segment to see growth in Q3. 

The company on Thursday reported higher earnings in its third quarter overall, despite a drop in sales as the company benefited from an insurance settlement, a pension tailwind and improved operating margin.

Overall, sales fell 4% to $8.7 billion from $9.1 billion a year ago due to the divestiture in January of the information technology services business, which accounted for $606 million in revenue a year ago. Excluding the IT divestiture, organic sales increased 3%. 

Net income increased 8% to $1.1 billion, $6.63 earnings per share (EPS), from $1 billion ($5.89 EPS), walloping consensus estimates by 64 cents per share. Operating margin at the company’s four business segments combined improved 40 basis points to 11.9% due to a combination of improved performance and the elimination of the drag on profits that the lower margin IT services business carried. 

Space Systems, Northrop Grumman’s fastest growing segment, is the only business that increased sales, despite a $48 million top-line hit related to the IT services divestiture. Sales were up 22%, driven by growth in the Ground Based Strategic Deterrent (GBSD) ICBM program, the Next Generation Interceptor (NGI) missile defense program, and classified work.

The Space Systems segment is on a continuous growth streak. This quarter’s growth follows a 29% sales jump in Q1 compared to the prior year, and a 34% increase in Q2 compared to the prior year. In 2020, Space Systems grew 18% in 2020 over 2019.

Kathy Warden, Northrop Grumman’s chairman, president and CEO said on Thursday’s investor call that the GBSD development has ramped up “significantly this year” and will add just over $1 billion incremental sales in 2021 versus 2020 and another $500 million incremental revenue in 2022. Operating income in the segment was up 29% on improved performance on classified programs.

The company also provided general guidance for 2022, with sales up in the low single-digit percentage-wise on continued organic growth, driven by Space Systems on GBSD, NGI, and the rampup of classified programs. Defense Systems and Mission Systems are also expected to grow while Aerospace Systems will decline in the mid-single digits on lower revenue in unmanned aircraft, the JSTARS ground surveillance aircraft, F/A-18 fighters, and classified programs.

A version of this article was first published by Via Satellite sister publication Defense Daily.