Northrop Grumman Corp. (NYSE:NOC)

Goodwill

The goodwill value remained relatively stable from 2018 through 2019, showing a slight increase from 18,672 million to 18,708 million US dollars. However, starting in 2020, the goodwill value experienced a noticeable decline, decreasing to 17,518 million and then maintaining a nearly constant level around 17,515 to 17,516 million through 2022. This indicates a reduction in intangible assets classified as goodwill over this period.

Gross Customer-Related and Other Intangible Assets

The gross customer-related and other intangible assets stayed almost flat throughout the five-year period, with values fluctuating minimally around 3,356 to 3,364 million US dollars. This constancy suggests no significant acquisitions or disposals of these intangible assets.

Accumulated Amortization

Accumulated amortization showed a consistent upward trend in absolute terms, increasing from -1,984 million US dollars in 2018 to -2,980 million by 2022. This reflects ongoing amortization charges, gradually reducing the book value of the intangible assets.

Net Customer-Related and Other Intangible Assets

The net value, calculated as gross intangible assets less accumulated amortization, demonstrated a clear declining trend over the period. Starting from 1,372 million in 2018, it fell steadily each year, reaching only 384 million by 2022. This signifies the diminishing net book value of these intangible assets due to ongoing amortization without notable additions.

Goodwill and Other Purchased Intangible Assets

The combined total of goodwill and other purchased intangible assets showed a downward trajectory throughout the five years. Beginning at 20,044 million in 2018, this value decreased each year to 17,900 million in 2022. This trend aligns with reductions seen in both goodwill and net intangible assets, indicating a gradual decline in the overall intangible asset base.

The financial data reveals several noteworthy trends over the five-year period from 2018 to 2022.

Total Assets

The reported total assets increased steadily from 37,653 million USD in 2018 to a peak of 44,469 million USD in 2020, before declining slightly to 42,579 million USD in 2021 and then rising again to 43,755 million USD in 2022. This pattern indicates overall growth in the asset base, despite some fluctuation in the later years. The adjusted total assets, which account for goodwill, also show a rising trend, increasing from 18,981 million USD in 2018 to 26,951 million USD in 2020, followed by a minor decline to 25,064 million USD in 2021, and then recovering to 26,239 million USD in 2022. The adjusted figures are consistently lower than the reported values, suggesting significant goodwill values on the balance sheet.

Shareholders’ Equity

The reported shareholders’ equity exhibits a continuous upward trajectory, growing from 8,187 million USD in 2018 to 15,312 million USD in 2022. This growth suggests strengthening equity position and retained earnings over the period. In contrast, the adjusted shareholders’ equity, which accounts for goodwill impairment or exclusion, shows a persistent negative value. Although the negative adjustment becomes less severe each year, moving from -10,485 million USD in 2018 to -2,204 million USD in 2022, it still remains negative. This indicates that when goodwill is removed or adjusted, the net equity position is significantly diminished, reflecting potential concerns about asset quality or the underlying value of intangible assets.

Overall, the data suggest that while the company’s reported asset base and equity are expanding, adjustments for goodwill reveal that a substantial portion of assets and equity may be tied to intangible elements whose valuation impacts the core financial strength. The improvement over time in adjusted shareholders’ equity, though still negative, may indicate efforts to mitigate goodwill-related issues or an improving asset base underneath goodwill. The fluctuations in total assets both reported and adjusted merit further investigation to understand the underlying causes.

The reported total asset turnover ratio exhibited a gradual improvement from 0.8 in 2018 to 0.84 in both 2021 and 2022, indicating a steady, albeit modest, enhancement in the efficiency with which the company utilized its assets to generate sales. Conversely, the adjusted total asset turnover ratio, which likely excludes goodwill or other adjustments, demonstrated a declining trend from 1.59 in 2018 to 1.39 in 2022, signaling a decrease in asset efficiency when the adjustments are considered.

Regarding financial leverage, the reported financial leverage ratio showed a consistent decrease from 4.6 in 2018 down to 2.86 in 2022. This reduction suggests that the company relied less on debt relative to equity over this period, potentially reflecting a more conservative capital structure or a deleveraging strategy. Data for adjusted financial leverage were not provided, preventing analysis on that front.

The reported Return on Equity (ROE) experienced notable volatility: starting at a high 39.44% in 2018, dropping to 25.49% in 2019, rising moderately to 30.14% in 2020, then spiking sharply to 54.19% in 2021 before declining again to 31.97% in 2022. This pattern indicates fluctuating profitability relative to shareholders’ equity, with 2021 being an outlier year of exceptionally high returns. Adjusted ROE data was not available, limiting a more detailed evaluation.

Analyzing the Return on Assets (ROA), the reported figures show a similar trend to ROE but with generally lower magnitudes, increasing from 8.58% in 2018 to a peak of 16.45% in 2021, then falling to 11.19% in 2022. The adjusted ROA values are consistently higher than the reported ones, starting at 17.01% in 2018 and eventually declining to 18.66% in 2022 after peaking at 27.95% in 2021. The disparity between reported and adjusted ROA suggests that removing goodwill or other adjustments improves the apparent profitability generated from assets.

Total Asset Turnover

Reported data reveal steady improvement; adjusted data show decline, indicating lower operational efficiency when adjustments are considered.

Financial Leverage

Reported leverage decreased over time, implying reduced reliance on debt financing; adjusted leverage data is unavailable.

Return on Equity (ROE)

Experienced fluctuations with a significant peak in 2021; variability suggests changing profitability levels relative to equity.

Return on Assets (ROA)

Reported ROA increased until 2021 then declined; adjusted ROA values are higher than reported, reflecting stronger asset profitability after adjustments.

Total Assets

The reported total assets showed a consistent upward trajectory from 2018 to 2020, increasing from $37,653 million to $44,469 million, before experiencing a slight decline in 2021 to $42,579 million and a marginal increase in 2022 to $43,755 million. In contrast, the adjusted total assets, which exclude goodwill, demonstrated a steady increase over the entire period, rising from $18,981 million in 2018 to $26,239 million in 2022.

Total Asset Turnover Ratios

The reported total asset turnover ratio exhibited a gradual improvement, starting at 0.80 in 2018 and reaching 0.84 by 2021, maintaining that level through 2022. Conversely, the adjusted total asset turnover ratio declined from 1.59 in 2018 to 1.37 in 2020, indicating a decreasing efficiency in utilizing adjusted assets. It then showed a slight recovery to 1.42 in 2021 but decreased again to 1.39 in 2022.

Overall Analysis

Reported total assets growth indicates asset base expansion until 2020, followed by stabilization and minor fluctuations. The adjusted asset growth suggests increasing tangible asset accumulation over the entire timeframe. The improvement in reported total asset turnover suggests enhanced overall asset management efficiency. However, the downward trend in adjusted total asset turnover from 2018 to 2020, with minor fluctuations thereafter, points to reduced efficiency in generating sales from tangible assets, which may warrant closer examination of asset utilization excluding goodwill.

An analysis of the data over the five-year period reveals several noteworthy trends in the financial structure and equity position of the company.

Total Assets

Reported total assets increased steadily from US$ 37,653 million in 2018 to US$ 43,755 million in 2022, reflecting a consistent growth in the company's asset base over the period. Adjusted total assets, which exclude goodwill or intangible assets, also showed a positive trend, rising from US$ 18,981 million in 2018 to US$ 26,239 million in 2022, indicating an improvement in the tangible asset base but with some fluctuations, notably a slight decline in 2021 before recovering in 2022.

Shareholders’ Equity

Reported shareholders' equity exhibited a robust upward trajectory, increasing from US$ 8,187 million in 2018 to US$ 15,312 million in 2022. This growth suggests strengthening net assets attributable to shareholders. Conversely, adjusted shareholders' equity, which appears to exclude certain intangible components such as goodwill, was negative throughout the period but showed a consistent reduction in its negative magnitude—from -US$ 10,485 million in 2018 to -US$ 2,204 million in 2022. This trend implies that while intangible liabilities or reductions impacted equity, their net adverse effect diminished over time.

Financial Leverage

Reported financial leverage decreased from a ratio of 4.6 in 2018 to 2.86 in 2022, indicating a progressive reduction in the level of debt relative to equity. This downward trend reflects an improvement in the company's capital structure, possibly via equity growth or debt reduction. There is no available data for adjusted financial leverage, limiting further insights into leverage excluding goodwill.

Overall, the company demonstrated an improving financial position marked by asset growth, substantial increases in reported equity, and decreasing leverage, suggesting enhanced solvency and balance sheet strength. The improving adjusted shareholders’ equity, albeit remaining negative, points to a potential reduction in goodwill or intangible asset-related adjustments impacting the net worth.

The financial data reveals several noteworthy trends over the five-year period ending December 31, 2022. The reported shareholders’ equity shows a consistent upward trajectory, increasing from $8.187 billion in 2018 to $15.312 billion in 2022. This increase indicates strengthening capital position and growth in owners’ residual interest in the company.

In contrast, the adjusted shareholders’ equity, which accounts for goodwill adjustments, indicates negative values throughout the period. Although the magnitude of the negative adjusted shareholders’ equity decreases significantly from -$10.485 billion in 2018 to -$2.204 billion in 2022, it remains negative. This trend suggests that when adjusted for goodwill impairments or similar accounting factors, the company's tangible equity base remains below zero, though it is improving over time.

The reported Return on Equity (ROE) displays some volatility. Beginning at 39.44% in 2018, it dips to 25.49% in 2019 before recovering to 30.14% in 2020. A sharp increase to 54.19% occurs in 2021, followed by a decline to 31.97% in 2022. This pattern reveals fluctuating profitability relative to shareholders’ equity, with the peak in 2021 potentially reflecting exceptional earnings or efficiency gains during that year.

No adjusted ROE data is provided, which limits interpretation of profitability when considering the goodwill adjustments made to shareholders’ equity.

Shareholders’ Equity

Reported equity shows positive and steady growth, marking an overall expansion in book value.

Adjusted equity is negative but progressively improving, indicating remediation in tangible equity despite ongoing goodwill-related deductions.

Return on Equity (ROE)

Reported ROE is variable, with a notable peak in 2021 followed by a moderate decline in 2022, suggesting profitability and efficiency shifts across years.

Adjusted ROE is unavailable, preventing evaluation of profitability relative to adjusted equity.

The financial data over the period from December 31, 2018, to December 31, 2022, reveals notable trends in the total assets and return on assets (ROA), both reported and goodwill adjusted.

Total Assets

Reported total assets exhibited a steady increase from 37,653 million US dollars in 2018 to 44,469 million US dollars in 2020, followed by a slight decline in 2021 to 42,579 million, and a modest recovery to 43,755 million in 2022. This pattern suggests overall growth with some volatility towards the end of the period.

Adjusted total assets, which exclude goodwill and possibly other adjustments, also showed consistent growth from 18,981 million in 2018 to a peak of 26,951 million in 2020. Similar to reported assets, adjusted assets decreased in 2021 to 25,064 million but increased again in 2022 to 26,239 million. The adjustment results in significantly lower asset values throughout the period, reflecting the impact of goodwill on total asset valuation.

Return on Assets (ROA)

Reported ROA experienced an initial decline from 8.58% in 2018 to 5.47% in 2019, indicating reduced profitability relative to total assets. This was followed by a moderate recovery to 7.17% in 2020. A substantial increase occurred in 2021, reaching 16.45%, before decreasing to 11.19% in 2022. The significant peak in 2021 may indicate improvement in operational efficiency or profitability innovations that year.

Adjusted ROA, which measures return on the adjusted asset base, was consistently higher than reported ROA throughout the period. It declined from 17.01% in 2018 to 10.04% in 2019, then increased to 11.83% in 2020. The most notable change occurred in 2021 when adjusted ROA surged to 27.95%, a markedly higher increase compared to reported ROA, implying superior performance on the basis of tangible assets. It then decreased to 18.66% in 2022 but remained well above earlier years and reported ROA.

In summary, Northrop Grumman Corp.'s asset base expanded over the five-year period with some fluctuation in the final years. The adjusted asset figures highlight the significant influence of goodwill on asset values. Profitability measured by ROA fluctuated substantially, with a pronounced peak in 2021, particularly in adjusted terms, indicating an improved return on tangible asset investment during that year. The higher adjusted ROA relative to reported ROA across all years suggests that excluding goodwill provides a clearer picture of operational performance efficiency.