Analyst Note| Burkett Huey, CFA |
Wide-moat rated Northrop Grumman delivered an exceptional quarter as strong growth from the Ground-Based Strategic Deterrent (GBSD) and national security space offset missing revenue from the sold IT services business. Total revenue of $9.2 billion and earnings per share of $6.42 beat FactSet consensus by 4.4% and 10.0%, respectively. While we think Northrop Grumman has the clearest growth path forward, we are not seeing value in the shares. After incorporating second-quarter earnings into our model, we are maintaining our $334 per share fair value estimate as higher anticipated growth in space systems was offset by Morningstar’s assumption of corporate tax increases.