Back to top

Image: Bigstock

Will Strong Order Growth Drive Northrop's (NOC) Q1 Earnings?

Read MoreHide Full Article

Northrop Grumman Corp. (NOC - Free Report) is scheduled to release first-quarter 2019 results on Apr 24, before the opening bell.

In the last reported quarter, the company delivered a positive earnings surprise of 10.79%. Impressively, Northrop Grumman surpassed the Zacks Consensus Estimate in the trailing four quarters, the average positive surprise being 19.93%.

Let's take a closer look at the factors influencing Northrop Grumman’s upcoming results.

Aerospace Systems: A Key Catalyst

The company’s Aerospace Systems segment has been a major revenue growth driver and is anticipated to retain its usual trend in the to-be-reported quarter. To this end, revenues from a restricted program in manned aircraft are expected to boost the top line. In line with this, the Zacks Consensus Estimate for revenues of this unit in the first quarter is pegged at $3,483 million, indicating growth of 6.2% from the year-ago quarter’s reported figure.

Moreover, during the fourth-quarter earnings call, management announced that it is in discussions with the Navy on a second multiyear contract for the E-2D program, while the first multiyear deal for 30 aircraft is progressing toward completion. We can expect further updates on these once Northrop Grumman releases first-quarter results.

Other Factors to Consider

The company's Mission Systems unit is also expected to witness revenue growth, as it continues to ramp up production in the SABR radar program. Also, the F-35 program is a key contributor to this segment’s growth. In line with this, the Zacks Consensus Estimate for revenues of this unit in the first quarter is pegged at $3,005 million, implying growth of 4.2% from the figure reported in the year-ago quarter.

Further, Northrop Grumman continues to secure frequent contracts from Pentagon, which should drive revenues in the to-be-reported quarter. In line with this, the Zacks Consensus Estimate for the company’s first-quarter revenues is pegged at $8.31 billion, suggesting growth of approximately 23.5% from the year-ago quarter’s reported figure.

During the fourth-quarter earnings call, Northrop Grumman increased its earnings guidance for 2019, with expectations to deliver strong operating margin rates and operating income growth at its four business segments. Considering this, we may expect the company’s first-quarter results to reflect solid bottom-line performance as well. In line with this, the Zacks Consensus Estimate for first-quarter earnings is pegged at $4.59, indicating 9% increase from the figure reported in the year-ago quarter.

What the Zacks Model Unveils

Our proven model shows that Northrop Grumman is likely to beat earnings estimates in the first 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Northrop Grumman has an Earnings ESP of +0.59% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Please note that 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.

Northrop Grumman Corporation Price and EPS Surprise

Other Stocks That Warrant a Look

Here are some other defense companies you may want to consider, as our model shows that these have the right combination of elements to post earnings beat this quarter:

Raytheon Company is expected to report first-quarter 2018 results on Apr 25. The company has an Earnings ESP of +0.54% and a Zacks Rank #2.

Lockheed Martin Corp. (LMT - Free Report) is expected to report first-quarter 2019 results on Apr 23. The company has an Earnings ESP of +4.16% and a Zacks Rank #3.

Huntington Ingalls Industries, Inc. (HII - Free Report) is expected to report first-quarter 2019 results on May 2. The company has an Earnings ESP of +1.93% and a Zacks Rank #3.

Is Your Investment Advisor Fumbling Your Financial Future?

See how you can more effectively safeguard your retirement with a new Special Report, “4 Warning Signs Your Investment Advisor Might Be Sabotaging Your Financial Future.”

Click to get it free >>

Published in