Northrop Grumman Stays Neutral - Analyst Blog
21 Mars 2013 - 6:04PM
Zacks
We have maintained our Neutral recommendation on
Northrop Grumman Corporation (NOC). The company
currently has a Zacks Rank #3 (Hold).
Why the Reiteration?
Northrop Grumman has a strong presence in Air Force, Space &
Cyber Security programs. Its product line is well positioned in
areas like defense electronics, unmanned aircraft and missile
defense. With the successful spin-off of its Shipbuilding business
in Mar 2011, Northrop Grumman’s revenue base is heavily skewed
towards programs with a short business cycle. Moreover, the
spin-off has contributed $1.4 billion to the company.
The positive case for Northrop Grumman stems from revenue growth
across the board, a broad diversification of programs, and an order
backlog of approximately $40.8 billion at the end of 2012. Revenue
and earnings growth continue to be driven by its strong presence in
cyber security, modernization of defense and homeland security
assets, intelligence, surveillance and reconnaissance systems,
advanced electronics and software development.
Also, Northrop Grumman’s strong balance sheet and cash flows
provide substantial financial flexibility and a cushion through an
incremental dividend, ongoing share repurchases and earnings
accretive acquisitions.
However, these positives are offset by apprehension regarding
defense cutbacks on high-cost platform programs, over-exposure to
the Department of Defense (DoD) budget, lower backlog, cost
over-runs and reductions in Afghanistan and Iraq operations.
Other Stocks to Consider
Other stocks worth considering are The Boeing
Company (BA), Lockheed Martin Corporation
(LMT) and Rockwell Collins Inc. (COL), all with a
Zacks Rank #2 (Buy).
BOEING CO (BA): Free Stock Analysis Report
ROCKWELL COLLIN (COL): Free Stock Analysis Report
LOCKHEED MARTIN (LMT): Free Stock Analysis Report
NORTHROP GRUMMN (NOC): Free Stock Analysis Report
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