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Will Aerospace Unit Drive Northrop's (NOC) Q3 Earnings?
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Defense giant Northrop Grumman Corporation (NOC - Free Report) is scheduled to release third-quarter 2017 results on Oct 25, before the opening bell.
Aerospace segment continues to be the major growth driver for Northrop Grumman. The company’s third-quarter results too is expected to be gain from the same. Substantial inflow of orders from Pentagon for the company’s varied product offerings also remains a major catalyst.
Let’s discuss the factors influencing Northrop Grumman’s quarterly results, in brief.
Aerospace Segment – A Key Catalyst
Aerospace Systems segment that fetch almost half of Northrop Grumman’s sales is a primary contributor of the company’s quarterly growth.
Notably, increased demand as well as deliveries of manned aircraft mainly boosts this segment’s sales growth. In the third quarter, the company won a number of contracts from the Pentagon in this regard.
Among them, the significant one is an Army contract worth $117 million for offering logistics support services for government-owned fixed wing fleet performing special electronic mission aircraft missions.
Impressively, the Zacks Consensus Estimate for the Aerospace Systems segment stands at $2,928 million, reflecting annual growth of 12.9%.
Northrop Grumman Corporation Price and EPS Surprise
Defense majors have been receiving a slew of contracts from Pentagon and foreign U.S. allies. Northrop Grumman too has been no exception in this regard. During the third quarter, the company’s notable contract wins include a contract worth $124.7 million to support the AN/APR-39 program, a $329 million Air Force contract for the Ground-based Strategic Deterrent and another order of $409 million for Next Generation Thermal, Power and Controls (NGT-PAC) program.
Consequently Northrop Grumman is expected to gain from the number of contracts it has won in the third quarter. Evidently, the Zacks Consensus Estimate for the company’s third-quarter sales is pegged at $6.3 billion, reflecting 2.6% year-over-year growth.
Other Factors to Consider
Segment-wise, Mission Systems business unit has been benefiting from the company’s successful cost-reduction initiatives. Considering this trend to continue in the second half of the year, Northrop Grumman has increased this unit’s annual sales expectation during second-quarter earnings call. Keeping this into consideration, we may expect the third-quarter results to reflect strong sales growth for this unit. Evidently, our consensus estimate called for sales of $1,156 million for Mission Systems, reflecting annual growth of 1%.
On the flip side, increased unallocated corporate expenses and effective tax rate dented the company’s second-quarter earnings growth. Anticipating similar expenses to linger, our consensus estimate for Northrop Grumman’s earnings of $2.92 per share reflects 3.2% annual decline.
Around the end of the third quarter, Northrop Grumman announced that it has agreed to acquire rocket-maker Orbital ATK for $9.2 billion. Although no direct impact of this deal will get reflected in the upcoming results, further updates from the transaction can be expected once the company releases its third-quarter report.
Earnings Whisper
Our proven model does not conclusively shows that Northrop Grumman is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as we have mentioned below:
Zacks ESP: Northrop Grumman has an Earnings ESP of -1.93%. This is because the Most Accurate estimate is pegged at $2.87, lower than the Zacks Consensus Estimate of $2.92. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Northrop Grumman currently carries a Zacks Rank #2, which along with a negative earnings ESP makes surprise prediction difficult.
Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks that Warrant a Look
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:
Huntington Ingalls Industries, Inc. (HII - Free Report) is expected to report third-quarter 2017 results on Nov 8. The company has an Earnings ESP of +2.04% and a Zacks Rank #2.
Textron Inc. (TXT - Free Report) recently reported third-quarter 2017 adjusted earnings from continuing operations of 65 cents per share, beating the Zacks Consensus Estimate of 62 cents by 4.8%. Total revenues in the quarter were $3.48 billion, which missed the Zacks Consensus Estimate of $3.54 billion by 1.5%.
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Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
Image: Bigstock
Will Aerospace Unit Drive Northrop's (NOC) Q3 Earnings?
Defense giant Northrop Grumman Corporation (NOC - Free Report) is scheduled to release third-quarter 2017 results on Oct 25, before the opening bell.
Aerospace segment continues to be the major growth driver for Northrop Grumman. The company’s third-quarter results too is expected to be gain from the same. Substantial inflow of orders from Pentagon for the company’s varied product offerings also remains a major catalyst.
Let’s discuss the factors influencing Northrop Grumman’s quarterly results, in brief.
Aerospace Segment – A Key Catalyst
Aerospace Systems segment that fetch almost half of Northrop Grumman’s sales is a primary contributor of the company’s quarterly growth.
Notably, increased demand as well as deliveries of manned aircraft mainly boosts this segment’s sales growth. In the third quarter, the company won a number of contracts from the Pentagon in this regard.
Among them, the significant one is an Army contract worth $117 million for offering logistics support services for government-owned fixed wing fleet performing special electronic mission aircraft missions.
Impressively, the Zacks Consensus Estimate for the Aerospace Systems segment stands at $2,928 million, reflecting annual growth of 12.9%.
Northrop Grumman Corporation Price and EPS Surprise
Northrop Grumman Corporation Price and EPS Surprise | Northrop Grumman Corporation Quote
Order Flows to Drive Sales
Defense majors have been receiving a slew of contracts from Pentagon and foreign U.S. allies. Northrop Grumman too has been no exception in this regard. During the third quarter, the company’s notable contract wins include a contract worth $124.7 million to support the AN/APR-39 program, a $329 million Air Force contract for the Ground-based Strategic Deterrent and another order of $409 million for Next Generation Thermal, Power and Controls (NGT-PAC) program.
Consequently Northrop Grumman is expected to gain from the number of contracts it has won in the third quarter. Evidently, the Zacks Consensus Estimate for the company’s third-quarter sales is pegged at $6.3 billion, reflecting 2.6% year-over-year growth.
Other Factors to Consider
Segment-wise, Mission Systems business unit has been benefiting from the company’s successful cost-reduction initiatives. Considering this trend to continue in the second half of the year, Northrop Grumman has increased this unit’s annual sales expectation during second-quarter earnings call. Keeping this into consideration, we may expect the third-quarter results to reflect strong sales growth for this unit. Evidently, our consensus estimate called for sales of $1,156 million for Mission Systems, reflecting annual growth of 1%.
On the flip side, increased unallocated corporate expenses and effective tax rate dented the company’s second-quarter earnings growth. Anticipating similar expenses to linger, our consensus estimate for Northrop Grumman’s earnings of $2.92 per share reflects 3.2% annual decline.
Around the end of the third quarter, Northrop Grumman announced that it has agreed to acquire rocket-maker Orbital ATK for $9.2 billion. Although no direct impact of this deal will get reflected in the upcoming results, further updates from the transaction can be expected once the company releases its third-quarter report.
Earnings Whisper
Our proven model does not conclusively shows that Northrop Grumman is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as we have mentioned below:
Zacks ESP: Northrop Grumman has an Earnings ESP of -1.93%. This is because the Most Accurate estimate is pegged at $2.87, lower than the Zacks Consensus Estimate of $2.92. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Northrop Grumman currently carries a Zacks Rank #2, which along with a negative earnings ESP makes surprise prediction difficult.
Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks that Warrant a Look
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:
Huntington Ingalls Industries, Inc. (HII - Free Report) is expected to report third-quarter 2017 results on Nov 8. The company has an Earnings ESP of +2.04% and a Zacks Rank #2.
Leidos Holdings, Inc. (LDOS - Free Report) is expected to report third-quarter 2017 results on Nov 2. The company has an Earnings ESP of +3.75% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Recent Peer Release
Textron Inc. (TXT - Free Report) recently reported third-quarter 2017 adjusted earnings from continuing operations of 65 cents per share, beating the Zacks Consensus Estimate of 62 cents by 4.8%. Total revenues in the quarter were $3.48 billion, which missed the Zacks Consensus Estimate of $3.54 billion by 1.5%.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>