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Northrop Grumman Corporation (NYSE:NOC) is a security system corporation. The company primarily operates in four divisions: Aerospace Systems, Electronic Systems, Information Systems and Technical Services. In 2009, Northrop Grumman acquired Sonoma Photonics. At the same time, NOC purchased assets from Swift Engineering's Killer Bee Unmanned Air Systems product line. Northrop Grumman is an international company that operates worldwide. The company markets and sells products and services to customers in 25 nations. Here is a brief analysis of the fundamentals:

Income Statement - 10 Year Summary (in Millions)

Sales

Total Net Income

EPS

Dividend

2001

$13.012,00

$459,00

2.59

0.8

2002

$17.406,00

$455,00

1.83

0.8

2003

$26.396,00

$758,00

2.02

0.8

2004

$29.000,00

$1.080,00

2.96

0.89

2005

$29.978,00

$1.396,00

3.84

1.05

2006

$29.991,00

$1.593,00

4.51

1.34

2007

$30.341,00

$1.751,00

5.01

1.42

2008

$32.315,00

-$1.379,00

-4.12

1.53

2009

$33.755,00

$1.573,00

4.87

1.67

2010

$34.757,00

$2.038,00

6.77

1.84

Net income increased by more than 4-fold in the last 10 years. It reached the peak value of $2 billion in the last year. The company was badly affected by the 2008 crisis. Total Net Income in 2008 was -$1.3 billion. However, the recovery was strong. Revenue has a stable upward trend. Sales increased by 2.5-fold in the last decade, and reached $34.7 billion by 2010.

Northrop Grumman paid regular dividends since 2001. The company even continued paying dividends in 2008, despite the big losses the earnings suffered. Dividends are also in an increasing trend since 2001. Payments started from $0.8 in 2001, and increased by more than 2-fold in 2010. The last quarterly dividend is $0.4264 with a record date of February 28, that was paid in March 12.

Balance Sheet - 10 Year Summary (in Millions)

Current Assets

Current Liabilities

Long Term Debt

2001

$20.818,00

$13.427,00

$5.388,00

2002

$42.326,00

$28.004,00

$9.748,00

2003

$33.022,00

$17.237,00

$5.760,00

2004

$33.303,00

$16.603,00

$5.466,00

2005

$34.214,00

$17.386,00

$4.231,00

2006

$32.009,00

$15.394,00

$4.342,00

2007

$33.373,00

$15.686,00

$4.268,00

2008

$30.197,00

$18.277,00

$3.443,00

2009

$30.252,00

$17.565,00

$4.191,00

2010

$31.421,00

$17.864,00

$4.045,00

According to the MSN finance data, Northrop’s current assets are in a fluctuating trend since 2002. Current assets amounted to $20.8 billion in 2001, $42.32 billion in 2002, and $32.4 billion in 2010. Northrop Grumman is an aggressive acquirer, paying substantial amounts for acquiring new companies. The fluctuations in the balance sheet reflect this dynamic. However, current assets have always been significantly higher than current liabilities. Long term debt is more or less stable around $4 billion. Net current surplus is $13.6 billion.

Avg P/E

Net Profit Margin (%)

2001

15.8

3.40%

2002

27.5

2.50%

2003

20.1

2.80%

2004

15.9

3.70%

2005

13

4.70%

2006

13.3

5.40%

2007

13.9

5.90%

2008

-14,5

-4.3

2009

9

4.70%

2010

8.2

5.90%

Average P/E was negative only in 2008. Other than that, average P/E Ratio is slightly volatile, bouncing between 27.5 and 8.2. Net profit margins are in single digits. The highest net profit margin of 5.95 is observed in the years 2007, and 2010.

Summary

Northrop Grumman employs over 117,000 thousand employees worldwide. Currently, financial statements indicate a gross margin of 18%, operating margin of 9.26%, and new profit margin of 5.9%. Insiders own 0.51% of the company, and they increased their holdings by 35.36% in the last 6 months. The current P/E is 9.41, and forward P/E falls to 9.15. EPS increased by 39.11% this year, and analysts estimate an EPS growth of 6.65% in the next 5 years. However, given the past performance of 11.98%, I think an EPS growth of 9% is a better estimator.

Based on a yield of 3%, EPS growth estimate of 9%, and ttm [trailing twelve month] P/E ratio of 9.41, NOC shares has a T-Metrix grade of 6.4 out of 10. The stock is up by a stunning 30% since September. Currently bears and bulls are battling at the $65 resistance. Depending on the winner, with a T-Metrix score higher than 5, Northrop Grumman can be considered as a dividend pick for the next 5 years.

Source: Northrop Grumman: A Dividend Pick for the Next 5 Years