Analysis of Profitability Ratios
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
Profitability Ratios (Summary)
Northrop Grumman Corp., profitability ratios
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).
An analysis of profitability ratios from 2018 to 2022 reveals a period of general volatility, characterized by a significant performance peak in 2021 followed by a correction in 2022. While top-line efficiency saw a gradual decline and subsequent stabilization, bottom-line metrics and returns on invested capital exhibited substantial fluctuations.
- Margin Analysis
- The gross profit margin experienced a gradual decline from 22.57% in 2018 to 20.32% in 2020, remaining relatively stagnant at approximately 20.4% through 2022. This indicates a contraction in production efficiency or an increase in the cost of sales relative to revenue. Operating profit margins showed higher volatility, dropping to 11.05% by 2020 before surging to a five-year high of 15.84% in 2021, only to fall to the lowest point in the period at 9.84% in 2022.
- Net profit margins followed a similar trajectory of instability. After a dip to 6.64% in 2019, the net margin peaked sharply at 19.64% in 2021. By 2022, this figure moderated to 13.38%, though it remained higher than the 2018 and 2019 levels.
- Return Metrics
- Return on Equity (ROE) exhibited significant variance, starting at 39.44% in 2018 and reaching a peak of 54.19% in 2021. The 2022 figure of 31.97% represents a stabilization below 2018 levels but remains substantially higher than the 2019 low of 25.49%.
- Return on Assets (ROA) mirrored the trend seen in ROE, with a notable peak of 16.45% in 2021. The ROA increased from a low of 5.47% in 2019 to 11.19% in 2022, suggesting an improvement in the efficiency of asset utilization compared to the 2018-2020 window.
Overall, the data indicates that while gross profitability has faced slight downward pressure, the organization achieved a significant spike in net earnings and capital efficiency in 2021, followed by a return toward historical averages in 2022.
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Return on Sales
Return on Investment
Gross Profit Margin
Northrop Grumman Corp., gross profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Gross profit | 7,474) | 7,268) | 7,478) | 7,259) | 6,791) | |
| Sales | 36,602) | 35,667) | 36,799) | 33,841) | 30,095) | |
| Profitability Ratio | ||||||
| Gross profit margin1 | 20.42% | 20.38% | 20.32% | 21.45% | 22.57% | |
| Benchmarks | ||||||
| Gross Profit Margin, Competitors2 | ||||||
| Boeing Co. | 5.26% | 4.84% | — | — | — | |
| Caterpillar Inc. | 26.91% | 26.30% | — | — | — | |
| Eaton Corp. plc | 33.19% | 32.28% | — | — | — | |
| GE Aerospace | 24.55% | 24.19% | — | — | — | |
| Honeywell International Inc. | 36.99% | 35.85% | — | — | — | |
| Lockheed Martin Corp. | 12.56% | 13.52% | — | — | — | |
| RTX Corp. | 20.38% | 19.40% | — | — | — | |
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
Gross profit margin = 100 × Gross profit ÷ Sales
= 100 × 7,474 ÷ 36,602 = 20.42%
2 Click competitor name to see calculations.
Between 2018 and 2022, a general expansion in sales and gross profit was observed, although this growth was accompanied by an initial contraction and subsequent stabilization of the gross profit margin.
- Revenue and Gross Profit Trajectory
- Sales demonstrated a consistent upward trend from 2018 to 2020, increasing from 30,095 million USD to a peak of 36,799 million USD. Following a slight contraction in 2021 to 35,667 million USD, sales recovered to 36,602 million USD by the end of 2022. Gross profit mirrored this movement, rising from 6,791 million USD in 2018 to 7,478 million USD in 2020, before settling at 7,474 million USD in 2022.
- Gross Profit Margin Analysis
- The gross profit margin exhibited a downward trend during the first three years of the period, falling from 22.57% in 2018 to 20.32% in 2020. This decline suggests that the cost of sales grew at a disproportionately higher rate than total revenue during this phase.
- Operational Stabilization
- A period of stabilization in profitability occurred between 2020 and 2022. The gross profit margin remained relatively flat, with marginal increments to 20.38% in 2021 and 20.42% in 2022. This indicates that the company successfully aligned its production costs with its revenue growth after the initial margin compression.
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Operating Profit Margin
Northrop Grumman Corp., operating profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Operating income | 3,601) | 5,651) | 4,065) | 3,969) | 3,780) | |
| Sales | 36,602) | 35,667) | 36,799) | 33,841) | 30,095) | |
| Profitability Ratio | ||||||
| Operating profit margin1 | 9.84% | 15.84% | 11.05% | 11.73% | 12.56% | |
| Benchmarks | ||||||
| Operating Profit Margin, Competitors2 | ||||||
| Boeing Co. | -5.33% | -4.66% | — | — | — | |
| Caterpillar Inc. | 13.97% | 14.27% | — | — | — | |
| Eaton Corp. plc | 14.55% | 15.69% | — | — | — | |
| GE Aerospace | 6.05% | 8.58% | — | — | — | |
| Honeywell International Inc. | 18.12% | 18.03% | — | — | — | |
| Lockheed Martin Corp. | 12.65% | 13.61% | — | — | — | |
| RTX Corp. | 8.07% | 7.70% | — | — | — | |
| Operating Profit Margin, Sector | ||||||
| Capital Goods | 8.29% | 9.11% | — | — | — | |
| Operating Profit Margin, Industry | ||||||
| Industrials | 9.06% | 9.24% | — | — | — | |
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
Operating profit margin = 100 × Operating income ÷ Sales
= 100 × 3,601 ÷ 36,602 = 9.84%
2 Click competitor name to see calculations.
The operating profit margin exhibited significant volatility between 2018 and 2022, characterized by a period of gradual erosion, a sharp spike in 2021, and a subsequent contraction to a five-year low in 2022.
- Revenue Performance
- Sales demonstrated a general upward trend from 2018 to 2020, increasing from 30,095 million US$ to 36,799 million US$. After a slight contraction in 2021 to 35,667 million US$, revenue recovered to 36,602 million US$ by the end of 2022.
- Operating Income Trends
- Operating income experienced moderate growth through 2020 before achieving a substantial peak of 5,651 million US$ in 2021. This peak was followed by a sharp decline in 2022, with operating income falling to 3,601 million US$, a level below the initial 2018 figure of 3,780 million US$.
- Operating Profit Margin Analysis
- The operating profit margin declined steadily from 12.56% in 2018 to 11.05% in 2020, indicating that operating expenses grew at a faster rate than sales during this interval. A significant reversal occurred in 2021, where the margin reached its highest point at 15.84%. However, this gain was erased in 2022, as the margin dropped precipitously to 9.84%, reflecting a marked decrease in operational efficiency relative to revenue.
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Net Profit Margin
Northrop Grumman Corp., net profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net earnings | 4,896) | 7,005) | 3,189) | 2,248) | 3,229) | |
| Sales | 36,602) | 35,667) | 36,799) | 33,841) | 30,095) | |
| Profitability Ratio | ||||||
| Net profit margin1 | 13.38% | 19.64% | 8.67% | 6.64% | 10.73% | |
| Benchmarks | ||||||
| Net Profit Margin, Competitors2 | ||||||
| Boeing Co. | -7.41% | -6.75% | — | — | — | |
| Caterpillar Inc. | 11.85% | 13.47% | — | — | — | |
| Eaton Corp. plc | 11.86% | 10.92% | — | — | — | |
| GE Aerospace | 0.31% | -9.17% | — | — | — | |
| Honeywell International Inc. | 14.00% | 16.11% | — | — | — | |
| Lockheed Martin Corp. | 8.69% | 9.42% | — | — | — | |
| RTX Corp. | 7.75% | 6.00% | — | — | — | |
| Net Profit Margin, Sector | ||||||
| Capital Goods | 5.27% | 3.71% | — | — | — | |
| Net Profit Margin, Industry | ||||||
| Industrials | 5.04% | 5.85% | — | — | — | |
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 profit margin = 100 × Net earnings ÷ Sales
= 100 × 4,896 ÷ 36,602 = 13.38%
2 Click competitor name to see calculations.
The financial performance between 2018 and 2022 is characterized by inconsistent profitability trends despite a general expansion in top-line revenue. Sales grew from 30,095 million USD in 2018 to 36,602 million USD by 2022, yet net earnings exhibited significant fluctuations, peaking sharply in 2021.
- Net Profit Margin Volatility
- A notable decrease in the net profit margin is observed between 2018 and 2019, falling from 10.73% to 6.64%. This contraction occurred despite a simultaneous increase in sales, indicating a period of margin compression likely driven by increased operational costs or non-recurring expenses.
- Peak Profitability Analysis
- The most significant surge in profitability occurred in 2021, with the net profit margin reaching 19.64%. During this period, net earnings spiked to 7,005 million USD, the highest value in the five-year sequence, despite a slight contraction in total sales. This suggests a period of exceptional operational efficiency or the impact of significant one-time financial gains.
- Recent Margin Stabilization
- In 2022, the net profit margin adjusted to 13.38%, representing a decline from the 2021 peak but remaining higher than the margins recorded between 2018 and 2020. This indicates a normalization of profitability at a higher baseline than the levels seen in the early part of the analyzed period.
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Return on Equity (ROE)
Northrop Grumman Corp., ROE calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net earnings | 4,896) | 7,005) | 3,189) | 2,248) | 3,229) | |
| Shareholders’ equity | 15,312) | 12,926) | 10,579) | 8,819) | 8,187) | |
| Profitability Ratio | ||||||
| ROE1 | 31.97% | 54.19% | 30.14% | 25.49% | 39.44% | |
| Benchmarks | ||||||
| ROE, Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 42.25% | 39.37% | — | — | — | |
| Eaton Corp. plc | 14.45% | 13.06% | — | — | — | |
| GE Aerospace | 0.62% | -16.17% | — | — | — | |
| Honeywell International Inc. | 29.74% | 29.85% | — | — | — | |
| Lockheed Martin Corp. | 61.86% | 57.62% | — | — | — | |
| RTX Corp. | 7.16% | 5.29% | — | — | — | |
| ROE, Sector | ||||||
| Capital Goods | 13.39% | 8.48% | — | — | — | |
| ROE, Industry | ||||||
| Industrials | 15.38% | 15.38% | — | — | — | |
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
ROE = 100 × Net earnings ÷ Shareholders’ equity
= 100 × 4,896 ÷ 15,312 = 31.97%
2 Click competitor name to see calculations.
The analysis of profitability metrics from 2018 to 2022 reveals a period of volatility in net earnings juxtaposed with steady growth in the equity base, leading to fluctuating returns for shareholders.
- Shareholders' Equity Trend
- A consistent upward trajectory is observed in shareholders' equity, which grew from US$ 8,187 million in 2018 to US$ 15,312 million by 2022. This steady expansion indicates a continuous increase in the company's net asset value over the five-year period.
- Net Earnings Performance
- Net earnings exhibited significant variance during the period. A decline was noted in 2019, reaching US$ 2,248 million, followed by a recovery in 2020 and a substantial peak in 2021 at US$ 7,005 million. Earnings subsequently moderated to US$ 4,896 million in 2022.
- Return on Equity (ROE) Analysis
- The ROE mirrored the fluctuations of net earnings, starting at 39.44% in 2018 and reaching a peak of 54.19% in 2021. The contraction to 31.97% in 2022 resulted from the combined effect of decreased net earnings relative to the prior year and a larger equity base, reflecting a normalization of profitability ratios.
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Return on Assets (ROA)
Northrop Grumman Corp., ROA calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net earnings | 4,896) | 7,005) | 3,189) | 2,248) | 3,229) | |
| Total assets | 43,755) | 42,579) | 44,469) | 41,089) | 37,653) | |
| Profitability Ratio | ||||||
| ROA1 | 11.19% | 16.45% | 7.17% | 5.47% | 8.58% | |
| Benchmarks | ||||||
| ROA, Competitors2 | ||||||
| Boeing Co. | -3.60% | -3.03% | — | — | — | |
| Caterpillar Inc. | 8.18% | 7.84% | — | — | — | |
| Eaton Corp. plc | 7.03% | 6.30% | — | — | — | |
| GE Aerospace | 0.12% | -3.28% | — | — | — | |
| Honeywell International Inc. | 7.97% | 8.60% | — | — | — | |
| Lockheed Martin Corp. | 10.84% | 12.41% | — | — | — | |
| RTX Corp. | 3.27% | 2.39% | — | — | — | |
| ROA, Sector | ||||||
| Capital Goods | 2.84% | 1.86% | — | — | — | |
| ROA, Industry | ||||||
| Industrials | 3.31% | 3.40% | — | — | — | |
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
ROA = 100 × Net earnings ÷ Total assets
= 100 × 4,896 ÷ 43,755 = 11.19%
2 Click competitor name to see calculations.
The analysis of profitability between 2018 and 2022 reveals a volatile yet overall upward shift in asset utilization efficiency, characterized by a significant peak in 2021.
- Net Earnings Volatility
- Net earnings experienced substantial fluctuations over the five-year period, declining from US$ 3,229 million in 2018 to US$ 2,248 million in 2019. A strong recovery followed, culminating in a peak of US$ 7,005 million in 2021 before moderating to US$ 4,896 million in 2022. These earnings swings were the primary catalyst for the variations in return metrics.
- Asset Base Stability
- Total assets demonstrated a steady increase from 2018 to 2020, rising from US$ 37,653 million to US$ 44,469 million. In the subsequent two years, the asset base stabilized, showing minimal variance with a slight decrease in 2021 followed by a marginal increase to US$ 43,755 million by the end of 2022.
- Return on Assets (ROA) Trends
- The ROA exhibited significant variability, moving from 8.58% in 2018 to a low of 5.47% in 2019, a decline driven by the simultaneous drop in net earnings and expansion of the asset base. A sharp acceleration in efficiency occurred in 2021, where ROA reached a high of 16.45% due to the surge in net earnings. While the ratio corrected to 11.19% in 2022, the company maintained a higher level of asset productivity compared to the 2018-2020 baseline.
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