Investigates several Critical Success Factors, Controls and Evaluation measures to provide precision for scorecards.
Compares industry earnings per share and price to earning ratios to assess Northrop Grumman's position relative to its primary competition in the aerospace and defense industry.
Segment Operation Margins: Listed in the annual report on pg 44-48. For example, the Aerospace Systems margin is 11.5% whereas the Electronics System margin is 13.4%. These are highly dependent on the contract award. NG-and the aggregate industry- has very little flexibility in determining the revenue side of the margin. Profit increases must come from productivity improvement.
Northrop Grumman Corporation earnings per share (a fair overall determination of its profit margin) were $6.77 in 2010 (Northrop Grumman, pg 1), and estimated at $6.86 for 2011, (Reuters, 2011a). Compare this to Boeing at $4.23, (Reuters, 2011c) and Raytheon at $5.01, (Reuters, 2011b). Owing to its efficiency and high profit margin, Northrop Grumman is positioned well to capitalize on market growth.
Another estimation of company efficiency is the Price to Earnings ratio (P/E ratio). This is the equity markets' valuation of the profitability and potential growth of a company. The higher the P/E, the more investors are willing to wager on future growth. Northrop Grumman trades at 8.44, Boeing at 13.68, and Raytheon at 7.94, (Reuters, 2011a, b, c). This illustrates equity market investors have higher confidence in Boeing's growth, and lower confidence in Raytheon's growth as compared to Northrop Grumman. This may focus Northrop Grumman's efforts against its competitors, or illustrate areas in which its corporate governance can be improved in relation to Boeing.
Supply effects on Northrop Grumman performance or its ability to perform contracts:
In 2010, total backlogged contracts totaled $64 billion (Northrop Grumman, pg 1). Total awards for the year were $30 billion-the supply bottleneck comprised 213% of new business for 2010! This situation is improving, however, as 2009 backlog was $69.2 ...