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Northrop Grumman Corp NOC

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Morningstar’s Analysis

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Northrop Grumman Delivers Exceptional Quarter as GBSD Continues to Drive Growth

Burkett Huey, CFA Equity Analyst

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.

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Company Profile

Business Description

Northrop Grumman is a defense contractor that is diversified across short-cycle and long-cycle businesses. The firm’s segments include aeronautics, mission systems, defense services, and space systems. The company’s aerospace segment creates the fuselage for the massive F-35 program and produces various piloted and autonomous flight systems. Mission systems creates a variety of sensors and processors for defense hardware. The defense systems segment is a mix between a long-range missile manufacturer and a defense IT service provider. Finally, the company’s space systems segment produces various space structures, sensors, and satellites.

2980 Fairview Park Drive
Falls Church, VA, 22042
T +1 703 280-2900
Sector Industrials
Industry Aerospace & Defense
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Cyclical
Employees 97,000