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$NOC continues to expect that capital expenditures will remain elevated in 2018 and 2019 before starting to return to a new normal that reflects a larger business. For 2018, the company does have additional CapEx as well as $100-150MM in costs from incremental interest and transaction cost related to its pending acquisition of $OA.
For 2018, $NOC expects Technology Services sales to be in the mid $4Bil range, with an operating margin rate of about 10%. Lower 2018 revenue is primarily due to expected declines in the KC-10 and JRDC programs. Lower revenue for these programs is being partially offset by growth in other programs.
For 2018, $NOC expects Mission Systems sales to grow to the mid to high $11Bil range with an operating margin of about 13%. Primary revenue growth drivers include continued ramp-up on combat avionics and communications programs, including F-35 sensors, SABR radar, and infrared countermeasures.
For 2018, $NOC expect Aerospace Systems to grow at top line at a high single-digit rate to the high $12Bil range. Growth in restricted activities will continue to be a major driver of revenue growth, along with continued ramp-up on the F-35 program. The company expects 2018 operating margin at Aerospace Systems to be in the low to mid 10% range.
$NOC currently expect the $OA transaction to close in 1H of this year. In late November, $OA shareholders overwhelmingly approved the terms of the transaction. The FTC is reviewing the proposed transaction in the U.S. in consultation with the DoD and $NOC notified the European Commission on Jan. 18 under the simplified procedure notice.
For 2018, $NOC expects sales of about $27Bil and EPS of $15.00-15.25. The company predicts segment operating margin in low-mid 11% range and operating margin of about 12%. $NOC sees effective tax rate of about 19.5%, capital expenditures of about $1Bil and free cash flow in the range of $2.0-2.3Bil.
$NOC's Aerospace Systems sales for 4Q17 rose 5% year-over-year, due to growth in Manned Aircraft and Autonomous Systems. Mission Systems sales grew 6%, on higher volume for Sensors and Processing and Advanced Capabilities programs. Technology Services sales slid 1% on lower volume for System Modernization and Services and Advanced Defense Services.
$NOC's operating income for 4Q17 decreased to $767MM from $831MM last year. The decline is primarily due to higher transaction costs from pending acquisition of $OA and deferred state tax expense from discretionary pension contribution. It also includes changes in contract mix at Aerospace Systems and Mission Systems.
$NOC reported a drop in 4Q17 earnings due to higher tax expenses from Tax Cuts and Jobs Act enactment and $500MM discretionary pre-tax pension contribution related to the write-down of deferred tax assets. Net income fell to $178MM or $1.01 per share from $525MM or $2.96 per share last year. Sales rose 4% to $6.6Bil. Adjusted EPS was $2.82.
$SSNC agreed to buy $DST in an all-cash transaction for $84 per share plus assumption of debt, equating to an enterprise value of about $5.4Bil. $SSNC plans to fund the acquisition and refinance existing debt with a combination of debt and equity. Both $SSNC's and $DST's BoD have approved the transaction, and it is expected to close by 3Q18.
$PARR said a wholly-owned subsidiary of Par Petroleum LLC has agreed to acquire 33 Cenex Zip Trip convenience stores from CHS Inc. for approx. $70MM plus the agreed value of inventory at closing. $PARR expects adjusted EBITDA from the acquired stores to be about $7-7.5MM in the first full year of operations. The deal is expected to close in 1Q18.
Business advisory firm $FCN has appointed Jan Naifeh as Senior Managing Director of its Corporate Finance & Restructuring segment. Most recently, Naifeh served SunTrust Bank as SVP of the Corporate and Investment Banking Special Assets Division. The appointment is part of FTI’s continuing investment in its healthcare industry expertise.
$FCN announced the appointment of Elliot Sloane, former CEO and founder of Sloane & Company, as a Senior Managing Director in the firm’s Strategic Communications segment. Mr. Sloane will report to Brian Kennedy, the segment’s Head of the Americas.
$NOC appointed Yolanda Murphy as VP of communications for its Technology Services sector, succeeding Alleace Gibbs, who will now serve as VP of communications for its Mission Systems sector, effective Jan. 1, 2018. Murphy will become a new member of Northrop Grumman's Communications Council. Gibbs will remain a member of that leadership group.
Corporate communications company $OMC said Mark Mulhern has been named CEO of its subsidiary We are Unlimited, effective January 8, 2018. Mulhern succeeds Brian Nienhaus, who will be taking up a new role within OMC later. Mulhern, who currently holds a senior position at iCrossing, had earlier served BBDO as EVP and JWT as Business Director.