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Northrop Grumman (NOC) Up 11.4% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Northrop Grumman (NOC - Free Report) . Shares have added about 11.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Northrop Grumman due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Northrop Grumman Beats on Q1 Earnings, Ups ‘19 EPS View
Northrop Grumman reported first-quarter 2019 earnings of $5.06 per share, which surpassed the Zacks Consensus Estimate of $4.59 by 10.2%. The bottom line also increased 5.6% from $4.79 recorded in the year-ago quarter. The year-over-year improvement can be primarily attributed to the addition of Innovation Systems in 2018 and solid sales growth.
Total Sales
In first-quarter 2019, Northrop Grumman reported total sales of $8,189 million, which missed the Zacks Consensus Estimate of $8,316 million by 1.5%. Sales, however, increased 22% from the year-ago quarter’s $6,735 million. The upside was primarily driven by solid single-digit increase in the Aerospace systems’ sales.
Segmental Details
Aerospace Systems: Sales at this segment totaled $3,496 million, which increased 7% year over year. This improvement was backed by increased sales in all three business areas — manned aircraft, autonomous systems and space programs.
Operating income rose 12% to $382 million, whereas operating margin expanded 50 basis points (bps) to 10.9%.
Mission Systems: Segment sales remained almost flat at $2,886 million as higher Cyber and ISR volume was offset by lower Advanced Capabilities, and Sensors and Processing volume.
Operating income rose 3% to $383 million, with operating margin expansion of 40 bps to 13.3%.
Technology Services: Sales at this segment dropped 15% to $977 million primarily due to the completion of several programs, mainly JRDC and KC-10.
Operating income decreased 16% to $102 million, with operating margin contraction of 30 bps to 10.4%.
Innovation Systems
Innovation Systems’ first-quarter 2019 sales increased 10% to $1,438 million compared with proforma sales in the first quarter of 2018. The sales increase was owing to higher volume for all business areas — Flight Systems, Space Systems and Defense Systems. Meanwhile, the segment’s operating income totaled $167 million and operating margin rate was 11.6%.
Operational Update
Total operating costs and expenses at the end of the quarter were $7,253 million, up 23.2%.
Operating income during the quarter increased 10.4% to $936 million.
Financial Condition
Northrop Grumman’s cash and cash equivalents as of Mar 31, 2019, were $755 million, down from $1,579 million as of Dec 31, 2018.
Long-term debt (net of current portion) as of Mar 31, 2019, was $13,863 million, down from $13,883 million as of 2018 end.
Net cash outflow from operating activities as of Mar 31, 2019, was $913 million compared with $237 million as of Mar 31, 2018.
2019 Guidance
Northrop Grumman consistently expects to generate revenues around $34 billion during 2019. The Zacks Consensus Estimate for the company’s full-year sales, pegged at $34.02 billion, lies almost in line with the company’s projected view.
The company continues to project free cash flow of $2.6-$3 billion for 2019.
However, Northrop raised its full-year earnings expectations from the range of $18.5-$19 to $18.90-$19.30 per share. The Zacks Consensus Estimate for the company’s 2019 earnings, pegged at $18.94, lies much below the mid-point of the company’s updated view.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
VGM Scores
Currently, Northrop Grumman has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Northrop Grumman has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Northrop Grumman (NOC) Up 11.4% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Northrop Grumman (NOC - Free Report) . Shares have added about 11.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Northrop Grumman due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Northrop Grumman Beats on Q1 Earnings, Ups ‘19 EPS View
Northrop Grumman reported first-quarter 2019 earnings of $5.06 per share, which surpassed the Zacks Consensus Estimate of $4.59 by 10.2%. The bottom line also increased 5.6% from $4.79 recorded in the year-ago quarter. The year-over-year improvement can be primarily attributed to the addition of Innovation Systems in 2018 and solid sales growth.
Total Sales
In first-quarter 2019, Northrop Grumman reported total sales of $8,189 million, which missed the Zacks Consensus Estimate of $8,316 million by 1.5%. Sales, however, increased 22% from the year-ago quarter’s $6,735 million. The upside was primarily driven by solid single-digit increase in the Aerospace systems’ sales.
Segmental Details
Aerospace Systems: Sales at this segment totaled $3,496 million, which increased 7% year over year. This improvement was backed by increased sales in all three business areas — manned aircraft, autonomous systems and space programs.
Operating income rose 12% to $382 million, whereas operating margin expanded 50 basis points (bps) to 10.9%.
Mission Systems: Segment sales remained almost flat at $2,886 million as higher Cyber and ISR volume was offset by lower Advanced Capabilities, and Sensors and Processing volume.
Operating income rose 3% to $383 million, with operating margin expansion of 40 bps to 13.3%.
Technology Services: Sales at this segment dropped 15% to $977 million primarily due to the completion of several programs, mainly JRDC and KC-10.
Operating income decreased 16% to $102 million, with operating margin contraction of 30 bps to 10.4%.
Innovation Systems
Innovation Systems’ first-quarter 2019 sales increased 10% to $1,438 million compared with proforma sales in the first quarter of 2018. The sales increase was owing to higher volume for all business areas — Flight Systems, Space Systems and Defense Systems. Meanwhile, the segment’s operating income totaled $167 million and operating margin rate was 11.6%.
Operational Update
Total operating costs and expenses at the end of the quarter were $7,253 million, up 23.2%.
Operating income during the quarter increased 10.4% to $936 million.
Financial Condition
Northrop Grumman’s cash and cash equivalents as of Mar 31, 2019, were $755 million, down from $1,579 million as of Dec 31, 2018.
Long-term debt (net of current portion) as of Mar 31, 2019, was $13,863 million, down from $13,883 million as of 2018 end.
Net cash outflow from operating activities as of Mar 31, 2019, was $913 million compared with $237 million as of Mar 31, 2018.
2019 Guidance
Northrop Grumman consistently expects to generate revenues around $34 billion during 2019. The Zacks Consensus Estimate for the company’s full-year sales, pegged at $34.02 billion, lies almost in line with the company’s projected view.
The company continues to project free cash flow of $2.6-$3 billion for 2019.
However, Northrop raised its full-year earnings expectations from the range of $18.5-$19 to $18.90-$19.30 per share. The Zacks Consensus Estimate for the company’s 2019 earnings, pegged at $18.94, lies much below the mid-point of the company’s updated view.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
VGM Scores
Currently, Northrop Grumman has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Northrop Grumman has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.