Northrop Grumman Corporation (NYSE:NOC) shareholders are probably feeling a little disappointed, since its shares fell 2.5% to US$331 in the week after its latest quarterly results. It looks like the results were a bit of a negative overall. While revenues of US$8.6b were in line with analyst predictions, statutory earnings were less than expected, missing estimates by 5.6% to hit US$5.15 per share. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the consensus forecast from Northrop Grumman's 15 analysts is for revenues of US$35.3b in 2020, which would reflect an okay 3.0% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to surge 69% to US$22.53. Before this earnings report, the analysts had been forecasting revenues of US$35.6b and earnings per share (EPS) of US$22.95 in 2020. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
It will come as no surprise then, to learn that the consensus price target is largely unchanged at US$392. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Northrop Grumman, with the most bullish analyst valuing it at US$455 and the most bearish at US$300 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's pretty clear that there is an expectation that Northrop Grumman's revenue growth will slow down substantially, with revenues next year expected to grow 3.0%, compared to a historical growth rate of 8.4% over the past five years. Compare this to the 81 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 2.8% per year. So it's pretty clear that, while Northrop Grumman's revenue growth is expected to slow, it's expected to grow roughly in line with the industry.
The Bottom Line
The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Northrop Grumman going out to 2024, and you can see them free on our platform here..
Even so, be aware that Northrop Grumman is showing 2 warning signs in our investment analysis , you should know about...
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