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Northrop Grumman (NOC) Down 1.3% Since Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Northrop Grumman Corporation (NOC - Free Report) . Shares have lost about 1.3% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is NOC due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Northrop Beats on Earnings in Q1, Hikes '18 EPS View

Northrop Grumman reported first-quarter 2018 earnings of $4.21 per share, beating the Zacks Consensus Estimate of $3.63 by 16%.

Reported earnings went up by 14.1% from $3.69 recorded in the year-ago quarter, on the back of higher year-over-year revenue.

Total Revenues

In first-quarter 2018, Northrop Grumman reported total revenues of $6.74 billion, beating the Zacks Consensus Estimate of $6.58 billion by 2.3%.

Revenues also increased 5.1% from the year-ago figure of $6.41 billion. The revenue upside was primarily driven by increase in Aerospace Systems and Mission Systems sales.

Segmental Details

Aerospace Systems: Segment sales of $3.28 billion increased 9.9% year over year primarily due to higher Manned Aircraft sales.

Moreover, operating income was up 6% year over year to $341 million while operating margin contracted 40 basis points (bps).

Mission Systems: Segment sales increased 3% to $2.88 billion due to higher volume for Sensors and Processing programs.

Operating income rose 3% to $371 million compared to the prior-year figure while operating margin increased 10 bps to 12.9%.

Technology Services: Sales at the segment fell 4% to $1.14 billion.

Operating income decreased 5% to $122 million along with its operating margin contracting 10 bps to 10.7%.

Operational Update

Total operating cost and expenses in the first quarter of 2018 amounted to $5.88 billion, an increase of 6% from the previous year’s figure.

Operating income for the first quarter of 2018 dipped 0.9% year over year, to $0.85 billion.

Financial Condition

Northrop Grumman’s cash and cash equivalents as of Mar 31, 2018 were $10.37 billion, down from $11.23 billion as of Dec 31, 2017.

Long-term debt (net of current portion) as of Mar 31, 2018, was $14.39 billion, in line with the long-term debt at 2017 end.

Net cash used in operating activities at the end of Mar 31, 2018 was $0.24 billion compared with the year-ago figure of $0.44 billion.

What’s Ahead?

Northrop Grumman continues to expect to generate total revenues in excess of $27 billion in 2018. The company also kept its free cash flow expectation in the range of $2-$2.3 billion in 2018. The 2018 earnings are now expected to be in the range of $15.40 to $15.65 per share, up from $15.00 to $15.25 per share.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been four revisions higher for the current quarter compared to two lower.

Northrop Grumman Corporation Price and Consensus

VGM Scores

At this time, NOC has a poor Growth Score of F, however its Momentum is doing a lot better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.

The company's stock is suitable solely for momentum based on our styles scores.

Outlook

Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. Notably, NOC has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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