Weak Book-to-Bill Ratio from Prime Contractors Shows Sales Declines Are Here to Stay

• Northrop Grumman’s 2013 sales were down 2.2% to $24.7B. Total backlog shrunk 9.3% to $37B, with a book-to-bill ratio of only 89% in 2013. Thus the company predictably provides guidance below $24B in revenue for 2014. Aerospace and Electronic systems have actually done OK, it’s really Information Systems (-10.3% Y/Y) that has been dragging down the overall topline, just as it did in 2012.

• Like Lockheed Martin and Northrop Grumman, Raytheon is closing 2013 with a modest decline in its sales, down 2.9% to $23.7B. The backlog is down by 6.9% to $33.7B (68% funded). With a 93.4% book-to-bill ratio in 2013, here too the company’s 2014 outlook anticipates another year of declining revenue. 3% growth abroad was not enough to offset lower domestic sales. Space and Airborne Systems saw the steepest revenue decrease (-7%) among divisions.