Northrop Grumman Corporation NOC benefits from acquisition of Orbital, favorable budgetary attributes and FMS contracts that will enable it to maintain a stable earnings stream.
Earnings estimates for Northrop Grumman have been revised upward in the past 60 days, reflecting analysts’ optimism on the stock. The Zacks Consensus Estimate for 2019 and 2020 earnings has moved up 3.7% and 2.32% to $20.38 and $22.92 during the said period, respectively.
Let’s focus on the factors that make the stock an appropriate pick at the moment.
Zacks Rank & VGM Score
The stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
If you are familiar with the Zack Style Scores, then it will be easy to understand the VGM Score. V stands for Value, G for Growth and M for Momentum. The VGM Score is simply a weighted combination of those scores. The VGM Score highlights the determining elements in a stock that can push the stock price higher. At present, the company carries a VGM Score of A.
Long-Term Growth & Surprise History
The company’s long-term (three to five years) earnings growth is pegged at 13.09%.
The company has an average four-quarter positive earnings surprise of 11.48%.
In the past 12 months, Northrop Grumman’ shares have surged 33.5% compared with the industry’s rise of 18.9%.
ROE & Current Ratio
ROE is a measure of a company’s efficiency in utilizing shareholders’ funds. ROE in the trailing 12 months for the company was 39.12% compared with the industry’s ROE of 16.88%.
Currently, the company has a current ratio of 1.29 that is higher than the industry’s current ratio of 1.22. Its financial strength will enable the company to meet near-term debt obligation.
The fiscal 2020 budget includes $718.3 billion as funding for the Pentagon, which reflects 5% real growth over the approved fiscal 2019 President’s budget. In particular, the proposal includes a spending provision worth $11.2 billion for the F-35 program, for which Northrop Grumman is a subcontractor. Such notable spending plans by the U.S. administration are expected to significantly boost defense primes like Northrop Grumman, going ahead.
Other Key Picks
Some other top-ranked stocks from the same sector are Leidos Holdings, Inc LDOS, Curtiss-Wright Corporation CW and Teledyne Technologies Incorporated TDY. All stocks hold a Zacks Rank #2.
Long-term earnings growth of Leidos, Curtiss-Wright and Teledyne Technologies is pegged at 7.5%, 8.26% and 7.5%, respectively.
Leidos, Curtiss-Wright and Teledyne Technologies delivered an average positive earnings surprise of 8.93%, 8.40% and 10.13% in the last four quarters, respectively.
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