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Northrop Grumman Corporation

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Northrop's product innovation and focus on strengthening its ISR wing will help maintain a stable earnings stream in light of the changing needs of the defense landscape. With the win of the Long-Range Strike Bomber contract, its revenue outlook should improve considerably over the coming years, leading to a multiple expansion opportunity. Again, as domestic contracts continue to see a downward trend, foreign military sales are providing the much needed respite and acting as a key performance catalyst for Northrop. Also, the company reported solid third quarter 2015 results with revenues and earnings beating Street expectations by 6% and 2.4%, respectively. However, dependence on funding authorizations by the U.S. government raises concerns.

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