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

Northrop Grumman on Thursday reported lower net income in its first quarter largely due to a decline in pension income while the company recorded a healthy sales gain and raised its earnings guidance for the year due to the pending sale of a stake in a business.

Net income slid 12 percent to $842 million, $5.50 earnings per share (EPS), from $955 million ($6.10 EPS) a year ago, easily beating consensus estimates of $5.14 EPS. Lower pension income clipped $164 million ($1.04 EPS) off the bottom-line.

Later this year, Northrop Grumman expects to close the sale of a minority stake in an international business resulting in a 40 cents EPS benefit to adjusted earnings in 2023. As a result, the company raised its adjusted per share earnings guidance for the year by 40 cents to between $22.25 and $22.85 EPS. No changes were made to the rest of the outlook.

Sales increased 6 percent to $9.3 billion from $8.8 billion a year ago.

Results at the operating level were mixed with Space Systems continuing to be a driver, recording strong double digit-percentage increases on the top and bottom lines due to the next-generation ICBM program and various ground and space-based missile defense programs.

Defense Systems also had higher sales and earnings, up in the single-digits, driven by Integrated Air and Missile Defense Battle Command System (IBCS), which entered full-rate production in April, 120mm tank training ammunition, and an international training program.

Sales and income were down at the Aeronautics Systems segment on declines in manned and unmanned aircraft work and lower favorable program completion adjustments than a year ago. Mission Systems posted higher sales but lower income due to contract mix and a loss on a joint venture.

Overall, segment operating margin fell a percent to 10.8 percent.

Inflation levels overall for the company are beginning to moderate but challenges remain and the company has efficiency initiatives underway and is working with its customers to reduce costs, Dave Keffer, Northrop Grumman’s chief financial officer, said. He also said that the supply chain showed “signs of modest progress” during the first quarter but the company continues “to believe that our supply base will experience areas of pressure for some time.”

Over the next several years, international sales are expected to grow at a double-digit clip due to strong demand for a variety of capabilities, Warden said. This demand includes recent approval to sell five more E-2D Hawkeye battle management command and control aircraft to Japan, Australia’s request for the Advanced Anti-Radiation Guided Missile-Extended Range, and opportunities for IBCS, munitions and sensors, she said.

Bookings in the quarter totaled $8 billion and backlog stood at $77.5 billion, down 2 percent from $78.7 billion at the end of 2022. Free cash flow in the quarter was $1 billion.

This article was first published by Via Satellite sister publication Defense Daily.