Stock Analysis on Net

Northrop Grumman Corp. (NYSE:NOC)

Financial Reporting Quality: Aggregate Accruals 

Microsoft Excel

Earnings can be decomposed into cash and accrual components. The accrual component (aggregate accruals) has been found to have less persistence than the cash component, and therefore (1) earnings with higher accrual component are less persistent than earnings with smaller accrual component, all else equal; and (2) the cash component of earnings should receive a higher weighting evaluating company performance.


Balance-Sheet-Based Accruals Ratio

Northrop Grumman Corp., balance sheet computation of aggregate accruals

US$ in millions

Microsoft Excel
Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018
Operating Assets
Total assets 43,755 42,579 44,469 41,089 37,653
Less: Cash and cash equivalents 2,577 3,530 4,907 2,245 1,579
Operating assets 41,178 39,049 39,562 38,844 36,074
Operating Liabilities
Total liabilities 28,443 29,653 33,890 32,270 29,466
Less: Current portion of long-term debt 1,072 6 742 1,109 517
Less: Long-term debt, net of current portion 11,805 12,777 14,261 12,770 13,883
Operating liabilities 15,566 16,870 18,887 18,391 15,066
 
Net operating assets1 25,612 22,179 20,675 20,453 21,008
Balance-sheet-based aggregate accruals2 3,433 1,504 222 (555)
Financial Ratio
Balance-sheet-based accruals ratio3 14.37% 7.02% 1.08% -2.68%
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
Boeing Co. 30.23% 75.78% 44.72% 114.97%
Caterpillar Inc. 4.22% -1.86% 2.83% 5.76%
General Electric Co. -33.29% -8.79% -52.01% -32.87%
Honeywell International Inc. 9.04% 2.69% 2.63% -3.49%
Lockheed Martin Corp. 15.67% 23.38% 5.01% -3.23%
Raytheon Technologies Corp. 1.48% 18.38% 0.61% 46.18%
Balance-Sheet-Based Accruals Ratio, Sector
Capital Goods 0.00% -0.42% 7.84% -16.41%
Balance-Sheet-Based Accruals Ratio, Industry
Industrials 0.00% 2.03% 4.76% -10.10%

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

1 2022 Calculation
Net operating assets = Operating assets – Operating liabilities
= 41,17815,566 = 25,612

2 2022 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2022 – Net operating assets2021
= 25,61222,179 = 3,433

3 2022 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 3,433 ÷ [(25,612 + 22,179) ÷ 2] = 14.37%

4 Click competitor name to see calculations.

Financial ratio Description The company
Balance-sheet-based accruals ratio Ratio is found by dividing balance-sheet-based aggregate accruals by average net operating assets. Using the balance-sheet-based accruals ratio, Northrop Grumman Corp. deteriorated earnings quality from 2021 to 2022.

Cash-Flow-Statement-Based Accruals Ratio

Northrop Grumman Corp., cash flow statement computation of aggregate accruals

US$ in millions

Microsoft Excel
Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018
Net earnings 4,896 7,005 3,189 2,248 3,229
Less: Net cash provided by operating activities 2,901 3,567 4,305 4,297 3,827
Less: Net cash (used in) provided by investing activities (1,241) 2,058 (1,211) (1,207) (8,878)
Cash-flow-statement-based aggregate accruals 3,236 1,380 95 (842) 8,280
Financial Ratio
Cash-flow-statement-based accruals ratio1 13.54% 6.44% 0.46% -4.06%
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors2
Boeing Co. -43.09% 172.40% 45.55% -6.67%
Caterpillar Inc. 5.38% -4.23% 2.56% 6.74%
General Electric Co. -53.22% -20.57% -25.92% -29.70%
Honeywell International Inc. 2.16% -1.79% -0.92% -2.89%
Lockheed Martin Corp. -1.36% -10.24% 4.50% 1.10%
Raytheon Technologies Corp. -1.96% -12.62% -0.32% 24.46%
Cash-Flow-Statement-Based Accruals Ratio, Sector
Capital Goods 0.00% -14.07% -0.90% -7.83%
Cash-Flow-Statement-Based Accruals Ratio, Industry
Industrials 0.00% -9.00% -2.04% -4.26%

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

1 2022 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × 3,236 ÷ [(25,612 + 22,179) ÷ 2] = 13.54%

2 Click competitor name to see calculations.

Financial ratio Description The company
Cash-flow-statement-based accruals ratio Ratio is found by dividing cash-flow-statement-based aggregate accruals by average net operating assets. Using the cash-flow-statement-based accruals ratio, Northrop Grumman Corp. deteriorated earnings quality from 2021 to 2022.