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Will Mission Systems Unit Drive Northrop's (NOC) Q3 Earnings?

Zacks Equity Research

Northrop Grumman Corp. NOC is scheduled to release third-quarter 2019 results on Oct 24, before the opening bell.

Sales growth in the company’s Mission Systems and Aerospace Systems segments is likely to show on overall revenues in the quarter to be reported.

Northrop Grumman surpassed the Zacks Consensus Estimate in the trailing four quarters, the average positive surprise being 20.11%.

Let's take a closer look at the factors that may have influenced its upcoming results.

Mission Systems: A Key Catalyst

The Mission Systems segment has been significantly contributing to the company’s total sales. Sales at this segment improved in the second quarter led by the company’s efforts to ramp up production in airborne and space-restricted programs, such as F-35, G/ATOR, CIRCM and IBCS. We expect this trend to have boosted this unit’s growth in the third quarter.

The Zacks Consensus Estimate for revenues of this unit in the third quarter is pegged at $3,057 million, implying growth of 5% from the figure reported in the year-ago quarter.

Aerospace Systems to Drive Revenues

The company’s Aerospace Systems segment has been a major revenue driver and is anticipated to retain its usual trend in the to-be-reported quarter. Particularly, manned and unmanned aircraft, and autonomous systems programs contribute majorly to this segment’s top line.

We anticipate this trend to have boosted this segment’s third-quarter performance as well. The Zacks Consensus Estimate for the segment’s revenues in the third quarter is pegged at $3,472 million, indicating growth of 5.8% from the year-ago quarter’s reported figure.

Interestingly, most of Northrop Grumman’s business segments are likely to have witnessed increased sales. This, the Zacks Consensus Estimate for the company’s third-quarter sales stands at $8,546 million, suggesting an increase of 5.7% from the figure reported in the prior-year quarter.

A View on Bottom Line

Buoyed by its strong performance in the previous quarter, Northrop Grumman raised its earnings guidance for 2019, with expectations to deliver strong segmental margin and operating income growth. Moreover, including the second quarter, the company expects to see a contraction in interest expenses through the year. These factors are likely to have contributed to the bottom line in the third quarter.

What the Zacks Model Unveils

Our proven model predicts an earnings beat for Northrop Grumman in the third quarter. 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. 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 +2.26% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Northrop Grumman Corporation Price and EPS Surprise

Northrop Grumman Corporation Price and EPS Surprise

Northrop Grumman Corporation price-eps-surprise | Northrop Grumman Corporation Quote

Other Stocks to Consider

Here are some defense companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Raytheon Company RTN is expected to report third-quarter 2019 results on Oct 24. The company has an Earnings ESP of +1.35% and a Zacks Rank #3.

Leidos Holdings Inc. LDOS is expected to report third-quarter 2019 results on Oct 29. The company has an Earnings ESP of +1.52% and a Zacks Rank #2.

Huntington Ingalls Industries, Inc. HII is expected to report third-quarter 2019 results on Nov 7. The company has an Earnings ESP of +2.09% and a Zacks Rank #3.

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