Northrop Grumman reported higher sales in Q2 in the Space segment due to the Space Development Agency (SDA) Tranche 2 Transport Layer (T2TL) programs Photo: Northrop Grumman

Northrop Grumman’s Space Systems segment posted the lowest growth rate among the company’s four segments in the second quarter of 2024, while leadership set expectations for flat Space sales this year. However, the Space segment improved its operating margin year-over-year by 14% in Q2. 

Northrop Grumman reported its second quarter results on July 25, posting growth in all four segments and overall sales growth of 7% year-over-year. The company reported $10.2 billion in sales and $940 million in net earnings. 

The Space Systems segment posted 3.6 billion in sales, a 2% increase from the same time last year. 

Northrop Grumman said higher sales were due to a $117 million increase on the Space Development Agency (SDA) Tranche 2 Transport Layer (T2TL) programs, increased sales on the HALO program for NASA, and higher materials volume on the GEM 63 rocket motor program in support of Amazon’s Project Kuiper. 

The company is changing how it reports the space segment, moving the Strategic Deterrent Systems division, which includes the Sentinel weapons system and other related programs from the Space Systems segment to the Defense Systems segment, effective July 1. This led to a change in guidance. 

CFO Dave Keffer told investors on a July 25 call that Northrop Grumman expects Space sales to be relatively flat this year, in the mid- to high $11 billion range. Space sales are expected to be down somewhat in 2025, then return to growth in 2026. 

Part of this is due to Lockheed Martin winning the Missile Defense Agency’s Next-Generation Interceptor (NGI) contract over Northrop Grumman and a canceled multi-billion dollar classified Space Force satellite program. 

“This profile is driven by the removal of NGI and the restricted program during 2024, which collectively had a run rate of about $1.5 billion in annualized sales,” Keffer told investors. “Those headwinds affect both this year and next. The larger impact will be experienced in 2025. We expect the rest of the Space portfolio to continue to grow.”

The Space segment had been on a four-year streak of double-digit growth since 2020, growing 14% year-over-year in 2023. 

However, the segment improved operating income by 14% year-over-year, with $324 million in operating income. Operating margin rate increased to 9.1% from 8.1%. 

“There’s been demonstrable progress there, really related to the actions we’ve been taking for the last year to improve program performance, deliver cost efficiencies, and deliver affordability for customers as we do it,” Keffer said. 

Northrop Grumman updated Space segment guidance to reflect the Strategic Deterrent Systems move. Space sales guidance for 2024 is now in the mid to high $11 billion range. Previous guidance was in the low to mid-$14 billion range.