Will Aeronautics Unit Drag Down Northrop (NOC) Q2 Earnings?
Northrop Grumman Corp. NOC is scheduled to release second-quarter 2020 results on Jul 30, before the opening bell.
Northrop Grumman surpassed the Zacks Consensus Estimate in three of the trailing four quarters, the average positive surprise being 9.31%.
Let's take a closer look at the factors likely to have influenced the company’s performance.
Will Aeronautics Hurt Q2 Results?
The company’s Aeronautics Systems segment has historically been a major revenue driver. However, thanks to the novel coronavirus outbreak, this business unit is expected to have performed poorly in the second quarter, owing to its exposure to commercial aerospace markets. Particularly, COVID-19-related volume pressure in the supply chain and in employee attendance, particularly at certain manufacturing facilities,has been observed in this segment since late March.
Consequently, reduced top and bottom line figures from this segment might have dragged down Northrop’s overall quarterly performance.
Northrop Grumman Corporation Price and EPS Surprise
Northrop Grumman Corporation price-eps-surprise | Northrop Grumman Corporation Quote
Other Factors to Consider
Increased restrictions on economic activities and stringent social distancing norms are expected to have hampered overall production rate of Northrop in the second quarter. No doubt, this in turn must have dragged down revenues for Northrop’s other business segments. As a result, the performance of all its segments is expected to have been poor.
Notably the Zacks Consensus Estimate for the company’s second-quarter sales is pegged at $8.59 billion, indicating 1.6% growth from the year-ago quarter’s reported figure.
Moreover, slide in production volume must have dealt a blow to the company’s operating margin in the soon-to-be-reported quarter, which in try may have hurt its bottom-line growth.
Q2 Backlog
Northrop Grumman has an impressive track record of witnessing a steady flow of orders from both Pentagon and its foreign allies, courtesy of the huge demand for its manned and unmanned aircraft and military radars. Notably, during the second quarter, the company won a handful of multi-million dollar contracts. This is expected to get reflected in the company's backlog count.
What the Zacks Model Unveils
Our proven model does not conclusively predict an earnings beat for Northrop Grumman this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Northrop Grumman has an Earnings ESP of 0.00% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Stocks to Consider
Here are some defense companies you may want to consider as these have the right combination of elements to post an earnings beat in their upcoming release:
Curtiss-Wright Corp. CW has an Earnings ESP of +13.62% and a Zacks Rank #3.
Leidos Holdings, Inc. LDOS has an Earnings ESP of +0.11% and a Zacks Rank #3.
A Recent Defense Release
Lockheed Martin LMT reported second-quarter 2020 adjusted earnings of $6.13 per share, which surpassed the Zacks Consensus Estimate of $5.71 by 7.4%.
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Northrop Grumman Corporation (NOC) : Free Stock Analysis Report
Lockheed Martin Corporation (LMT) : Free Stock Analysis Report
CurtissWright Corporation (CW) : Free Stock Analysis Report
Leidos Holdings, Inc. (LDOS) : Free Stock Analysis Report
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