NOC a "Defensive" Play

Northrop Grumman (NOC) offers a strong program portfolio positioned to take advantage of growth areas in the defense budget, an improving balance sheet and an ongoing share repurchase program. Favorable projected revenue, the acquisition of 3001 International, favorable ruling regarding the BAMS contract [a deal offered NOC by the U.S. Navy, validated by the Government Accounting Office, or GAO], diversified revenue and earnings streams with strong growth and discounted relative valuation metrics collectively support our bullish outlook for NOC.

Accordingly, we maintain our BUY recommendation on NOC common stock with a six-month target price of $54.75. Price appreciation to our near-term valuation target coupled with the $0.40 per share quarterly dividend which we deem secure and sustainable based upon low projected payouts, represents 24.1% upside potential.

The company supplies a broad array of products and services to the U.S. Department of Defense (DoD), including electronic systems, information technology, submarines and surface ships, aircraft, space technology, and systems integration services. The company operates four business segments: Information & Services (35.22% of Q2 2008 revenue), Aerospace (27.47%), Electronics (18.58%) and Shipbuilding (18.73%).

Read the full analyst report on NOC

Read the full analyst report on NOC