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Why Is Northrop Grumman (NOC) Up 3.7% Since Last Earnings Report?
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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 3.7% in that time frame, underperforming 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 Grummanreported first-quarter 2020 earnings of $5.15 per share, which missed the Zacks Consensus Estimate of $5.42 by 5%. However, the bottom line rose 1.8% from $5.06 in the year-ago quarter.
Total Sales
Northrop Grumman reported total salesof $8,620 million for the first quarter, surpassing the Zacks Consensus Estimate of $8,474 million by 1.7%. Moreover, revenues increased 5.3% from the year-ago quarter’s $8,189 million. The year-over-year upside was primarily driven by an 8% increase in Space Systems sales, 6% in Defense Systems sales and 6% in Mission Systems sales.
Backlog Count
Northrop Grumman’s total backlog stood at $64.17 billion at the end of first-quarter 2020, compared with $64.84 billion at 2019-end. Of the total backlog, $32.52 billion was funded.
Segmental Details
Effective Jan 1, 2020, Northrop made some structural changes in its reportable segments. Here are its new segments:
Aeronautics Systems: Segment sales of $2,843 million grew 1% year over year as a result of higher sales from both autonomous systems and manned aircraft.
Operating income declined 16% to $259 million, whereas operating margin contracted 180 basis points (bps) to 9.1%.
Mission Systems: Segment sales increased 6% to $2,340 million driven by higher sales volume from airborne sensors and networks along with maritime/land systems and sensors programs.
Operating income rose 9% to $348 million, with operating margin expanding 40 bps to 14.8%.
Defense Systems: Sales at this segment improved 6% to $1,881 million due to higher sales of battle management and missile systems as well as mission readiness.
Operating income declined 3% to $196 million, with operating margin contracting 10 bps to 10.4%.
Space Systems: Space Systems’ first-quarter 2020 sales increased 8% to $1,948 million owing to higher sales from the Space program.
The segment’s operating income improved 6% to $199 million whileoperating margin contracted 20 bps to 10.2%.
Operational Update
Total operating costs and expenses at the end of the quarter were $7,686 million, up 6%.
Operating income during the quarter slipped 0.2% to $934 million.
Financial Condition
Northrop Grumman’s cash and cash equivalents, as of Mar 31, 2020, were $3,278 million, up from $2,245 million, as of Dec 31, 2019.
Long-term debt (net of current portion), as of Mar 31, 2020, was $14,299 million, up from $12,770 million, as of 2019-end.
Net cash outflow from operating activities, as of Mar 31, 2020, was $993 million compared with $913 million, as of Mar 31, 2019.
2020 Guidance
Considering the global impact of the COVID-19 pandemic, Northrop Grumman has lowered its 2020 revenue and earnings guidance. The company currently expects to generate revenues in the range of $35.0-$35.4 billion, compared with its prior guidance range of $35.3-$35.8 billion during 2020. The Zacks Consensus Estimate of $35.63 billion is higher than the midpoint of the company provided guidance range.
The company’s 2020 earnings are currently expected to be in the range of $21.80-$22.20 per share, compared with the previous band of $22.75-$23.15 per share. The Zacks Consensus Estimate of $22.97 is higher than the company provided guidance range.
The company however, continues to expect free cash flow of $3.15-$3.45 billion in 2020.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -6.43% due to these changes.
VGM Scores
Currently, Northrop Grumman has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, 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.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Northrop Grumman has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Northrop Grumman (NOC) Up 3.7% Since Last Earnings Report?
It has been about a month since the last earnings report for Northrop Grumman (NOC - Free Report) . Shares have added about 3.7% in that time frame, underperforming 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 Misses Q1 Earnings, Cuts ’20 EPS View
Northrop Grummanreported first-quarter 2020 earnings of $5.15 per share, which missed the Zacks Consensus Estimate of $5.42 by 5%. However, the bottom line rose 1.8% from $5.06 in the year-ago quarter.
Total Sales
Northrop Grumman reported total salesof $8,620 million for the first quarter, surpassing the Zacks Consensus Estimate of $8,474 million by 1.7%. Moreover, revenues increased 5.3% from the year-ago quarter’s $8,189 million. The year-over-year upside was primarily driven by an 8% increase in Space Systems sales, 6% in Defense Systems sales and 6% in Mission Systems sales.
Backlog Count
Northrop Grumman’s total backlog stood at $64.17 billion at the end of first-quarter 2020, compared with $64.84 billion at 2019-end. Of the total backlog, $32.52 billion was funded.
Segmental Details
Effective Jan 1, 2020, Northrop made some structural changes in its reportable segments. Here are its new segments:
Aeronautics Systems: Segment sales of $2,843 million grew 1% year over year as a result of higher sales from both autonomous systems and manned aircraft.
Operating income declined 16% to $259 million, whereas operating margin contracted 180 basis points (bps) to 9.1%.
Mission Systems: Segment sales increased 6% to $2,340 million driven by higher sales volume from airborne sensors and networks along with maritime/land systems and sensors programs.
Operating income rose 9% to $348 million, with operating margin expanding 40 bps to 14.8%.
Defense Systems: Sales at this segment improved 6% to $1,881 million due to higher sales of battle management and missile systems as well as mission readiness.
Operating income declined 3% to $196 million, with operating margin contracting 10 bps to 10.4%.
Space Systems: Space Systems’ first-quarter 2020 sales increased 8% to $1,948 million owing to higher sales from the Space program.
The segment’s operating income improved 6% to $199 million whileoperating margin contracted 20 bps to 10.2%.
Operational Update
Total operating costs and expenses at the end of the quarter were $7,686 million, up 6%.
Operating income during the quarter slipped 0.2% to $934 million.
Financial Condition
Northrop Grumman’s cash and cash equivalents, as of Mar 31, 2020, were $3,278 million, up from $2,245 million, as of Dec 31, 2019.
Long-term debt (net of current portion), as of Mar 31, 2020, was $14,299 million, up from $12,770 million, as of 2019-end.
Net cash outflow from operating activities, as of Mar 31, 2020, was $993 million compared with $913 million, as of Mar 31, 2019.
2020 Guidance
Considering the global impact of the COVID-19 pandemic, Northrop Grumman has lowered its 2020 revenue and earnings guidance. The company currently expects to generate revenues in the range of $35.0-$35.4 billion, compared with its prior guidance range of $35.3-$35.8 billion during 2020. The Zacks Consensus Estimate of $35.63 billion is higher than the midpoint of the company provided guidance range.
The company’s 2020 earnings are currently expected to be in the range of $21.80-$22.20 per share, compared with the previous band of $22.75-$23.15 per share. The Zacks Consensus Estimate of $22.97 is higher than the company provided guidance range.
The company however, continues to expect free cash flow of $3.15-$3.45 billion in 2020.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -6.43% due to these changes.
VGM Scores
Currently, Northrop Grumman has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, 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.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Northrop Grumman has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.