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).
The analysis of the financial ratios over the five-year period reveals several notable trends in profitability and efficiency metrics.
- Gross Profit Margin
- The gross profit margin exhibited a consistent decline from 22.57% in 2018 to 20.32% in 2020, followed by relative stability around 20.4% in 2021 and 2022. This suggests a gradual reduction in the core profitability of the company’s sales, potentially due to rising costs or pricing pressures.
- Operating Profit Margin
- The operating profit margin mirrored a downward trend from 12.56% in 2018 to 11.05% in 2020, but showed a marked increase to 15.84% in 2021. Subsequently, it fell significantly to 9.84% in 2022. This fluctuation indicates volatility in operating efficiency, with a strong recovery in 2021 overshadowed by a sharp decrease thereafter.
- Net Profit Margin
- The net profit margin demonstrated a substantial drop from 10.73% in 2018 to 6.64% in 2019, followed by a recovery to 8.67% in 2020. A significant surge occurred in 2021, reaching 19.64%, before declining to 13.38% in 2022. These variations imply variable impacts from non-operating activities or tax effects, contributing to profitability swings.
- Return on Equity (ROE)
- The ROE decreased from a very high 39.44% in 2018 to 25.49% in 2019 but recovered moderately to 30.14% in 2020. A remarkable peak at 54.19% occurred in 2021, followed by a significant decline to 31.97% in 2022. This pattern suggests substantial disparities in how effectively shareholders' equity was utilized across the years, with 2021 being an exceptional year.
- Return on Assets (ROA)
- The ROA followed a similar trajectory to ROE, declining from 8.58% in 2018 to 5.47% in 2019, improving to 7.17% in 2020, then sharply increasing to 16.45% in 2021 before decreasing to 11.19% in 2022. This indicates fluctuations in asset efficiency, with outstanding performance in 2021 and a moderate reduction the following year.
Overall, the data indicates a period marked by a gradual erosion of gross profitability, followed by volatility in both operating and net margins. The year 2021 stands out as an anomalously strong year in terms of profitability and returns, likely due to extraordinary factors enhancing operating performance and shareholder returns. However, the subsequent decline in 2022 suggests challenges in maintaining this heightened performance level. The consistent patterns across ROE and ROA further corroborate the variations in operational efficiency and asset utilization over the period.
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% | -9.78% | — | — | |
| Caterpillar Inc. | 26.91% | 26.30% | 25.47% | — | — | |
| Eaton Corp. plc | 33.19% | 32.28% | 30.52% | — | — | |
| GE Aerospace | 24.55% | 24.19% | 17.26% | — | — | |
| Honeywell International Inc. | 36.99% | 35.85% | 32.07% | — | — | |
| Lockheed Martin Corp. | 12.56% | 13.52% | 13.23% | — | — | |
| RTX Corp. | 20.38% | 19.40% | 15.08% | — | — | |
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.
The financial data reveals several notable trends over the five-year period ending December 31, 2022. Gross profit in absolute terms showed a general upward movement, increasing from $6,791 million in 2018 to $7,474 million in 2022. This indicates that the company succeeded in generating more profit from its core activities despite fluctuations in other metrics.
Sales revenue followed a similar upward trajectory, rising steadily from $30,095 million in 2018 to $36,602 million in 2022. This consistent growth in sales revenue suggests expansion in market activities or increased demand for the company's products or services.
However, the gross profit margin percentage experienced a downward trend from 2018 to 2020, dropping from 22.57% to 20.32%. After stabilizing somewhat in 2021 at 20.38%, it marginally increased to 20.42% in 2022. This decline in margin percentage over the period could imply rising cost pressures or a shift in product mix affecting profitability per unit of sales.
- Gross Profit
- Increased overall from $6,791 million to $7,474 million, reflecting growth in core profitability.
- Sales Revenue
- Grew steadily from $30,095 million to $36,602 million, indicating ongoing expansion in sales volume or pricing.
- Gross Profit Margin
- Decreased from 22.57% to 20.32% between 2018 and 2020, then slightly recovered to 20.42% by 2022, suggesting some pressure on cost efficiency or changes in product pricing strategy.
In summary, while sales and gross profit figures demonstrate healthy growth, the declining trend in gross profit margin points to potential challenges in managing production or operating costs relative to revenue growth.
Operating Profit Margin
Northrop Grumman Corp., operating profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ 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% | -21.95% | — | — | |
| Caterpillar Inc. | 13.97% | 14.27% | 11.67% | — | — | |
| Eaton Corp. plc | 14.55% | 15.69% | 11.45% | — | — | |
| GE Aerospace | 6.05% | 8.58% | 5.49% | — | — | |
| Honeywell International Inc. | 18.12% | 18.03% | 17.45% | — | — | |
| Lockheed Martin Corp. | 12.65% | 13.61% | 13.22% | — | — | |
| RTX Corp. | 8.07% | 7.70% | -3.34% | — | — | |
| Operating Profit Margin, Sector | ||||||
| Capital Goods | 8.29% | 9.11% | 3.00% | — | — | |
| Operating Profit Margin, Industry | ||||||
| Industrials | 9.06% | 9.24% | 3.13% | — | — | |
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.
- Operating Income
- The operating income exhibited a generally positive trend from 2018 to 2021, increasing from 3,780 million US$ to a peak of 5,651 million US$ by the end of 2021. However, in 2022, there was a significant decline, with operating income falling to 3,601 million US$, a decrease that brought the value close to levels observed around 2018.
- Sales
- Sales figures showed consistent growth from 2018 through 2020, rising from 30,095 million US$ to 36,799 million US$. In 2021, sales experienced a slight decline to 35,667 million US$. This was followed by a modest recovery in 2022, with sales increasing marginally to 36,602 million US$.
- Operating Profit Margin
- The operating profit margin decreased gradually from 12.56% in 2018 to 11.05% in 2020. In 2021, it improved markedly, reaching 15.84%, which coincided with the peak in operating income that year. By 2022, the margin had decreased significantly to 9.84%, the lowest level in the observed period, indicating a reduction in operational efficiency or increased costs relative to sales.
In summary, the company experienced growth in sales and operating income up to 2020 and 2021, respectively, with a notable peak in operating profit margin in 2021. The decline in both operating income and operating profit margin in 2022, alongside stable sales, suggests pressure on profitability during that year. This may reflect changes in cost structure or other operational challenges.
Net Profit Margin
Northrop Grumman Corp., net profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ 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% | -20.42% | — | — | |
| Caterpillar Inc. | 11.85% | 13.47% | 7.68% | — | — | |
| Eaton Corp. plc | 11.86% | 10.92% | 7.90% | — | — | |
| GE Aerospace | 0.31% | -9.17% | 7.81% | — | — | |
| Honeywell International Inc. | 14.00% | 16.11% | 14.64% | — | — | |
| Lockheed Martin Corp. | 8.69% | 9.42% | 10.45% | — | — | |
| RTX Corp. | 7.75% | 6.00% | -6.22% | — | — | |
| Net Profit Margin, Sector | ||||||
| Capital Goods | 5.27% | 3.71% | 1.85% | — | — | |
| Net Profit Margin, Industry | ||||||
| Industrials | 5.04% | 5.85% | 0.09% | — | — | |
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.
- Net Earnings
- Net earnings demonstrated variability over the five-year period. Beginning at 3,229 million US dollars in 2018, earnings declined to 2,248 million in 2019, indicating a potential challenge or operational pressure during that year. The figure rebounded in 2020 to 3,189 million and then experienced a significant surge in 2021, reaching 7,005 million. However, in 2022, net earnings decreased to 4,896 million, which remains higher than most previous years except for 2021. This pattern suggests a volatile earnings cycle, with 2021 representing an exceptional peak.
- Sales
- Sales exhibited a generally upward trend from 2018 to 2020, increasing from 30,095 million US dollars to 36,799 million. There was a slight dip in 2021 to 35,667 million, followed by a moderate recovery in 2022 to 36,602 million. Overall, sales growth over the period was positive but showed some fluctuations, indicating variability in revenue generation or market conditions.
- Net Profit Margin
- The net profit margin mirrored the fluctuations seen in net earnings. Starting at 10.73% in 2018, it fell sharply to 6.64% in 2019, reflecting decreased profitability relative to sales. The margin improved to 8.67% in 2020 and peaked significantly at 19.64% in 2021, before declining to 13.38% in 2022. The sharp increase in 2021 suggests improved cost control, pricing power, or other factors contributing to higher profitability that year. The subsequent decrease in 2022 indicates some easing of these factors but maintains a profit margin above the levels observed before 2021.
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% | 19.56% | — | — | |
| Eaton Corp. plc | 14.45% | 13.06% | 9.44% | — | — | |
| GE Aerospace | 0.62% | -16.17% | 16.04% | — | — | |
| Honeywell International Inc. | 29.74% | 29.85% | 27.23% | — | — | |
| Lockheed Martin Corp. | 61.86% | 57.62% | 113.60% | — | — | |
| RTX Corp. | 7.16% | 5.29% | -4.88% | — | — | |
| ROE, Sector | ||||||
| Capital Goods | 13.39% | 8.48% | 4.42% | — | — | |
| ROE, Industry | ||||||
| Industrials | 15.38% | 15.38% | 0.24% | — | — | |
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
ROE = 100 × Net earnings ÷ Shareholders’ equity
= 100 × 4,896 ÷ 15,312 = 31.97%
2 Click competitor name to see calculations.
- Net Earnings
- The net earnings displayed fluctuations over the five-year period. After a decrease from 3,229 million USD in 2018 to 2,248 million USD in 2019, earnings increased to 3,189 million USD in 2020. A significant surge was observed in 2021, reaching 7,005 million USD, followed by a decline to 4,896 million USD in 2022. This pattern suggests variability in profitability, including a peak year in 2021.
- Shareholders’ Equity
- Shareholders’ equity consistently increased throughout the period, starting at 8,187 million USD in 2018 and rising steadily each year to 15,312 million USD by the end of 2022. This progression indicates ongoing accumulation of retained earnings and/or additional capital contributions, reflecting strengthening financial stability and growth in net assets.
- Return on Equity (ROE)
- ROE experienced notable variability, beginning at a high of 39.44% in 2018, then declining to 25.49% in 2019. It rebounded to 30.14% in 2020 and surged markedly to 54.19% in 2021. In 2022, ROE eased to 31.97%. The fluctuations in ROE correspond with changes in net earnings against the steadily rising equity base, highlighting shifts in profitability efficiency relative to shareholder investment.
- Overall Insights
- The combination of increasing shareholders’ equity and fluctuating net earnings resulted in variable returns on equity. The extraordinary earnings spike and ROE peak in 2021 stand out, suggesting operational or market factors driving exceptional profitability that year. The subsequent decrease in 2022 points to a normalization of earnings. The steady growth in equity implies ongoing capital strength despite earnings volatility.
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% | -7.80% | — | — | |
| Caterpillar Inc. | 8.18% | 7.84% | 3.83% | — | — | |
| Eaton Corp. plc | 7.03% | 6.30% | 4.43% | — | — | |
| GE Aerospace | 0.12% | -3.28% | 2.25% | — | — | |
| Honeywell International Inc. | 7.97% | 8.60% | 7.40% | — | — | |
| Lockheed Martin Corp. | 10.84% | 12.41% | 13.47% | — | — | |
| RTX Corp. | 3.27% | 2.39% | -2.17% | — | — | |
| ROA, Sector | ||||||
| Capital Goods | 2.84% | 1.86% | 0.80% | — | — | |
| ROA, Industry | ||||||
| Industrials | 3.31% | 3.40% | 0.04% | — | — | |
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.
- Net earnings
- Net earnings showed considerable fluctuation over the five-year period. Starting at $3,229 million in 2018, earnings decreased to $2,248 million in 2019, followed by a recovery in 2020 to $3,189 million. A significant peak occurred in 2021, with net earnings reaching $7,005 million, before declining to $4,896 million in 2022. This pattern suggests volatility in profitability, with a notable spike in 2021 likely influenced by extraordinary factors or improved operational performance.
- Total assets
- Total assets generally increased from $37,653 million in 2018 to a peak of $44,469 million in 2020. They declined slightly in 2021 to $42,579 million and then showed a modest increase to $43,755 million in 2022. This indicates steady investment in assets with some minor fluctuations, possibly reflecting changes in capital expenditure or asset management strategies.
- Return on Assets (ROA)
- The return on assets mirrored the trends seen in net earnings with some variation. ROA started at 8.58% in 2018, declined to 5.47% in 2019, and increased to 7.17% in 2020. It then sharply rose to 16.45% in 2021 before falling back to 11.19% in 2022. The spike in 2021 ROA suggests a period of enhanced efficiency or improved profitability relative to the asset base, aligning with the peak in net earnings that year. Despite the decrease in 2022, ROA remained significantly higher than in earlier years.