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Northrop Grumman (NOC) Gains But Lags Market: What You Should Know

Zacks Equity Research

In the latest trading session, Northrop Grumman (NOC) closed at $368.98, marking a +1.28% move from the previous day. This change lagged the S&P 500's 1.42% gain on the day. At the same time, the Dow added 1.42%, and the tech-heavy Nasdaq gained 1.4%.

Prior to today's trading, shares of the defense contractor had lost 1.11% over the past month. This has lagged the Aerospace sector's gain of 0.17% and the S&P 500's gain of 0.38% in that time.

NOC will be looking to display strength as it nears its next earnings release, which is expected to be October 24, 2019. The company is expected to report EPS of $4.74, down 27.52% from the prior-year quarter. Our most recent consensus estimate is calling for quarterly revenue of $8.55 billion, up 5.7% from the year-ago period.

For the full year, our Zacks Consensus Estimates are projecting earnings of $19.64 per share and revenue of $34.01 billion, which would represent changes of -7.92% and +13.01%, respectively, from the prior year.

It is also important to note the recent changes to analyst estimates for NOC. These revisions typically reflect the latest short-term business trends, which can change frequently. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

Based on our research, we believe these estimate revisions are directly related to near-team stock moves. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. The Zacks Consensus EPS estimate has moved 0.06% higher within the past month. NOC currently has a Zacks Rank of #2 (Buy).

Digging into valuation, NOC currently has a Forward P/E ratio of 18.55. This represents a premium compared to its industry's average Forward P/E of 17.72.

Meanwhile, NOC's PEG ratio is currently 1.49. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. The Aerospace - Defense was holding an average PEG ratio of 2.02 at yesterday's closing price.

The Aerospace - Defense industry is part of the Aerospace sector. This group has a Zacks Industry Rank of 22, putting it in the top 9% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on Zacks.com.


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