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Will Northrop Grumman Corporation's (NYSE:NOC) Earnings Grow In The Next Couple Of Years?

Simply Wall St

The latest earnings update Northrop Grumman Corporation (NYSE:NOC) released in December 2018 signalled that the business experienced a strong tailwind, eventuating to a double-digit earnings growth of 13%. Below is a brief commentary on my key takeaways on how market analysts perceive Northrop Grumman's earnings growth trajectory over the next couple of years and whether the future looks even brighter than the past. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.

View our latest analysis for Northrop Grumman

Market analysts' consensus outlook for next year seems pessimistic, with earnings reducing by -2.7%. But in the following year, there is a complete contrast in performance, with generating double digit 14% compared to today’s level and continues to increase to US$4.2b in 2022.

NYSE:NOC Past and Future Earnings, April 14th 2019

While it is helpful to be aware of the growth year by year relative to today’s value, it may be more beneficial estimating the rate at which the company is rising or falling every year, on average. The benefit of this method is that we can get a bigger picture of the direction of Northrop Grumman's earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To compute this rate, I've appended a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 8.8%. This means, we can assume Northrop Grumman will grow its earnings by 8.8% every year for the next few years.

Next Steps:

For Northrop Grumman, there are three important aspects you should further examine:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is NOC worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether NOC is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of NOC? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.