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In this article, I will feature one industrial stock that has seen intensive insider selling during the last 30 days. Intensive insider selling can be defined by the following three criteria:

  1. The stock was sold by three or more insiders within one month.
  2. The stock was not purchased by any insiders in the month of intensive selling.
  3. At least two sellers decreased their holdings by more than 10%.

Northrop Grumman Corporation (NYSE:NOC) provides systems, products, and solutions in aerospace, electronics, information systems, and technical service areas to government and commercial customers worldwide.

(click to enlarge)

Insider selling during the last 30 days

Here is a table of Northrop Grumman's insider activity during the last 30 days.

NameTitleTrade DateShares SoldRule 10b5-1Current OwnershipDecrease In Ownership
Denise PeppardVPFeb 274,548No11,961 shares27.5%
Gloria FlachVPFeb 245,997Yes11,937 shares33.4%
Michael HardestyVPFeb 243,620No8,578 shares29.7%
James PalmerCFOFeb 11-2444,589Yes237,143 shares15.8%
Sheila ChestonVPFeb 18-2122,862Yes41,738 shares35.4%
Vic FazioDirectorFeb 193,281No33,696 shares8.9%
Linda MillsVPFeb 1246,869No82,894 shares36.1%
Aulana PetersDirectorFeb 12281No23,974 shares1.2%
Wesley BushCEOFeb 1130,000Yes65,501 shares31.4%

There have been 162,047 shares sold by insiders during the last 30 days. Gloria Flach, James Palmer, Sheila Cheston, and Wesley Bush sold shares pursuant to a Rule 10b5-1 plan. More details about the Rule 10b5-1 trading plan can be found from this link.

Insider selling by calendar month

Here is a table of Northrop Grumman's insider activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
February 2014162,0470
January 201400
December 201391,6460
November 2013136,9600
October 201355,2641,000
September 201300
August 2013121,9000
July 201300
June 201374,1230
May 201388,4070
April 20139,6800
March 20133,5000
February 201300
January 201300

There have been 743,527 shares sold, and there have been 1,000 shares purchased by insiders since January 2013. The month of February 2014 has seen the most insider selling.

Financials

Northrop Grumman reported the full-year 2013 financial results on January 30 with the following highlights:

Revenue$24.7 billion
Net income$2.0 billion
Cash$5.2 billion
Debt$5.9 billion
Backlog$37.0 billion

Northrop Grumman's revenues peaked in 2010.

Outlook

Northrop Grumman's 2014 guidance is as follows:

Revenue$23.5-$23.8 billion
EPS$8.70-$9.00

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(Source: Earnings presentation)

Competition

Northrop Grumman's competitors include Boeing (NYSE:BA), General Dynamics (NYSE:GD), and Lockheed Martin (NYSE:LMT). Here is a table comparing these companies.

CompanyNOCBAGDLMT
Market Cap:26.23B95.32B38.87B52.17B
Employees:65,300168,40096,000115,000
Qtrly Rev Growth (yoy):-0.050.070.00-0.05
Revenue:24.66B86.62B31.22B45.36B
Gross Margin:0.220.150.180.10
EBITDA:3.62B8.17B4.24B5.34B
Operating Margin:0.130.070.120.10
Net Income:1.95B4.58B2.49B2.95B
EPS:8.355.966.679.14
P/E:14.4921.5216.6017.90
PEG (5 yr expected):1.721.671.882.17
P/S:1.061.111.231.14

Northrop Grumman, together with Lockheed Martin, has the weakest revenue growth among these four companies.

Here is a table of these competitors' insider activities this year.

CompanyInsider buying / sharesInsider selling / shares
BA048,868
GD0271,535
LMT098,228

Lockheed Martin, General Dynamics, and Boeing have also seen intensive insider selling during the last 30 days.

Conclusion

There have been nine different insiders selling Northrop Grumman, and there have not been any insiders buying Northrop Grumman during the last 30 days. Seven of these nine insiders decreased their holdings by more than 10%. Northrop Grumman has an insider ownership of 0.40%.

There are four analyst buy ratings, 16 neutral ratings, and zero sell ratings with an average price target of $119.88. Before going short Northrop Grumman, I would like to get a bearish confirmation from the Point and Figure chart. The three main reasons for the proposed short entry are bearish analyst price targets, negative revenue growth, and the intensive insider-selling activity.

Source: Northrop Grumman: 9 Different Insiders Have Sold Shares During The Last 30 Days