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

Space continues to be the fast-growing segment for Northrop Grumman, and the company expects growth to continue. In Northrop Grumman’s third quarter results posted on Thursday, the Space segment reported an 18% increase in revenue compared to the same time period last year. Space posted $3.2 billion in sales, compared to $2.7 billion in the same time last year.

The segment offset lower sales for Aeronautics Systems and Defense Systems. Overall, Northrop Grumman posted a 3% sales increase in Q3, with sales $9 billion as compared with $8.7 billion in the third quarter of 2021.

Within the Space segment, Launch & Strategic Missiles sales increased due to ramp-up on development programs, including a $115 million increase on the Ground Based Strategic Deterrent (GBSD) program and a $103 million increase on the Next Generation Interceptor (NGI) program. It also includes higher volume on the GEM63 rocket motor program after United Launch Alliance placed a $2 billion order in June to support launches for Amazon’s Project Kuiper. 

Sales in the Space business area were driven by a $129 million increase due to ramp-up on the Space Development Agency (SDA) Tranche 1 Transport Layer and Tranche 1 Tracking Layer programs awarded in 2022, as well as higher volume on restricted programs and the Commercial Resupply Services (CRS) program. 

The operating margin for the segment shrunk slightly, from 10.7% in Q3 last year to 9.2% in Q3 2022. 

Northrop Grumman raised 2022 revenue guidance for the Space segment, but lowered operating margin guidance. Previously, the company expected Space revenue for 2022 in the high $11 billion, now it is projecting about $12 billion for the full year. Operating margin is now expected around high 9% when it was previously 10%. 

CFO Dave Keffer commented on growth in Space said on Thursday’s investor call. “We continue to expect space to remain our fastest-growing business, with sales growing by another $1 billion over 2022,” he said. 

“The expansion and the growth opportunity [in Space] is broad-based across multiple orbits and across multiple mission areas, from missile tracking to ISR, to growth in our supportive launch capabilities,” Keffer added. “It’s really an outstanding segment of performance for us. You see a growing market, but also growth in our market share.”  

Overall, Keffer said Northrop Grumman is now seeing positive hiring trends. The company added nearly 1,000 net new employees in Q2 and an additional 2,700-plus people in Q3. 

“With continued positive hiring and retention results, we’ve improved our labor-driven sales visibility,” Keffer said. “The supply base is now the key to achieving our full year sales outlook. We’re seeing temporal challenges in the supply chain as are most others, including longer lead times and higher costs in some areas. Our suppliers are a critical element of the defense industrial base, and we’re closely monitoring small businesses who are the most vulnerable to the challenges of this macroeconomic environment, particularly inflation.”