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ModernGraham Annual Valuation Of Northrop Grumman Corporation
- NOC is not suitable for Defensive Investors or Enterprising Investors following the ModernGraham approach.
- According to the ModernGraham valuation model, the company is undervalued at the present time.
- The market is implying 3.88% earnings growth over the next 7-10 years, which is well below the rate the company has seen in recent years.
Update: Northrop Grumman Reports Earnings Per Share Growth, Growing BacklogJonathan Weber • Thu, Oct. 23
- Northrop Grumman reported earnings per share growth of six percent and beat the estimate on EPS and revenue.
- Northrop Grumman's order backlog grew eight percent year over year.
- With FY2014 EPS guidance of $9.45, NOC trades at a huge discount to its peers and the broad market.
- In my original article I had pointed out that the company's earnings per share were growing continuously.
- The earnings release confirmed my original opinion: Northrop Grumman is a compelling investment.
Northrop Grumman Trades At A Discount To Its Peers And Offers An Attractive Yield
- Northrop Grumman reports high returns on capital and high liquidity.
- A dividend yield of 2.3% and an annual dividend growth rate of 10.2% make the company a compelling option for income investors.
- Northrop Grumman trades at a considerable discount to its peers and the broad market.
Northrop Grumman - Analysts Turn Bullish, Here Is Why I Am Much More Cautious
- Deutsche Bank turns optimistic on Northrop Grumman, citing potential for increased defense spending.
- The upgrade seems late in my eyes after shares have doubled since the start of 2013.
- I remain much more cautious following this momentum and historically high margins.
Northrop Grumman: Using Buybacks To Cover Up Years Of Poor Revenues
- From 2011 to 2014, Northrop Grumman has reduced its share count from 253 million to the 204 million-207 million range.
- This has allowed the company to report revenue per share growth of $104 per share to $116 per share over that timeframe.
- However, revenue-per-share growth is entirely driven by buybacks, as the company actually generates less total revenue now compared to 2011.
- Deutsche Bank upgraded Northrop to a buy rating, citing that defense spending is bottoming.
- This reinforces my position that Northrop is poised to benefit from the current unrest throughout the world.
- Although I didn’t predict this specific upgrade in my last article, I did state that the stock was likely to increase about 7.5% over the next year.
- New developments have also occurred since my last article.
Northrop Grumman: Beacon Of Stability In An Unstable World
- Northrop Grumman transformed itself in the last decade. Lower margin programs have been let go to focus on more profitable programs.
- NOC relentlessly bought back 40% of the company in the last decade.
- In the last 5 years, earnings per share are not in any way correlated to global or US military budgets.
- Could it be that defense companies like NOC adapt to a changing environment and can be profitable in various scenarios?
Northrop Grumman: Another Beneficiary Of The War On Terror/Global Conflicts
- The current unrest throughout the world should create a steady supply of new contracts.
- The stock is undervalued as compared to the market.
- The combination of dividends and stock appreciation should make Northrop a winning investment.
Northrop Grumman's Dividend Cushion Score Is Worth A LookValuentum • Oct. 16, 2013
Thu, Nov. 20, 8:39 AM| Comment!
Wed, Nov. 19, 11:20 PM
Tue, Nov. 18, 10:13 AM
- Northrop Grumman (NOC +0.6%) has received a $116M contract to provide upgrades and spares to the AN/AAQ-28(NYSE:V) LITENING targeting pods of the Air Force, Air Force Reserve, Air National Guard and Marine Corps.
- This award will bring all Air Force Block 1 pods to the G4 configuration, completing the service's transition to the latest version of the LITENING system.
Mon, Nov. 17, 8:29 AM
- Northrop Grumman (NYSE:NOC) has been awarded a contract from Naval Air Systems Command to deliver its next-generation mission computer for the Marine Corps' H-1 helicopter upgrade program.
- Under the terms of the contract, the company will provide FlightPro Gen III mission computers for the UH-1Y and AH-1Z aircraft.
- Deliveries will be completed by October 2017.
Wed, Oct. 22, 10:18 AM
- Northrop Grumman (NOC +1.4%) has filed a formal protest with the U.S. Government Accountability Office against the U.S. Air Force's decision to pick Raytheon (RTN +0.3%) to develop its next-generation, long-range radar system.
- Raytheon overpowered both Lockheed Martin (LMT +1.5%) and Northrop Grumman to develop a replacement for the Air Force's current TPS-75 radar, which has been in service since the late 1960s.
- Spokeswoman Patty Welsh from Hanscom Air Force Base in Massachusetts says the Air Force issued a stop-work order for the program after the protest was filed.
- Lockheed officials say they were still reviewing the briefing they received from the Air Force about the contract award to Raytheon.
Wed, Oct. 22, 8:22 AM
- Net income of $473M, or $2.26 per diluted share vs. $497M, or $2.14 per diluted share, in the third quarter of 2013.
- The company repurchased 6M shares of its common stock for $753M during the quarter. As of Sept. 30, the company had repurchased 37.7M shares toward its previously announced goal of retiring 60M shares of its common stock by the end of 2015.
- Total backlog as of Sept. 30 increased 8% Q/Q to $38.5B.
- The company expects full-year earnings to be between $9.40-$9.50 per share, and revenue of $23.8B.
- Q3 results
- NOC +0.7% premarket
Wed, Oct. 22, 7:04 AM
Tue, Oct. 21, 5:30 PM
Tue, Oct. 7, 7:18 AM
- Raytheon (NYSE:RTN) overpowered both Lockheed Martin (NYSE:LMT) and Northrop Grumman (NYSE:NOC) for a contract to build a next-generation long-range radar system for the U.S. Air Force, replacing current TPS-75 radar, which has been in service since the late 1960s.
- The deal, valued at around $1B, kicks off the next phase of a program begun in 2009, when the Air Force funded work on full-scale prototypes by all three companies.
- Raytheon's initial $19.5M deal will cover continued development of the Three-Dimensional Expeditionary Long-Range Radar (3DELRR) program, and construction of three initial systems. The Air Force then plans to buy three more systems for a total of $72M.
- The value of the contract is likely to increase significantly due to additional orders from the Air Force and foreign military purchases.
Fri, Sep. 26, 3:27 PM
- Northrop Grumman (NOC +2.4%) is upgraded to Buy from Hold with a $145 price target at Deutsche Bank, which sees the down cycle in defense spending fading and the possibility of budget increases into FY 2017.
- The firm feels defense spending is bottoming as global tensions rise along with a shift in public sentiment on threats and priorities, and a turn in defense spending would benefit NOC more than its peers since 86% of the company's sales are tied to the U.S. government.
- DB also likes that NOC returns 100% of free cash flow to its shareholders; NOC increased its dividend by 15% in May, has bought back 17M million shares YTD, has retired 30M shares and plans to retire 30M more shares by year-end 2015.
Wed, Sep. 24, 7:49 AM
- U.S. Navy official Captain Jim Hoke says improved reliability may allow the Navy to purchase fewer than the 68 Northrop Grumman (NYSE:NOC) Triton spy drones planned for maritime surveillance, but current estimates still call for the entire order.
- Hoke says he also has a team of people looking for other ways to reduce the cost of building and operating the unmanned plane. Each aircraft currently costs about $100M.
- The Navy aims to start using Triton drones by the end of 2017.
Fri, Sep. 19, 8:10 AM
- Lockheed Martin (NYSE:LMT) is narrowing in on a ~$4B deal with the Department of Defense for 43 more F-35 fighter jets that will lower the cost of the jet's airframe by 2-4%.
- The government buys the jets' engines separately from Pratt & Whitney, which said this week that contracts for the seventh and eighth batches of its F135 engines will result in prices 7.5%-8% cheaper than the firm's last purchase.
- Other initiatives are also being worked on to lower the plane's costs, including changes in manufacturing and "block buys" by some foreign countries with pending orders.
- Lockheed is also investing $170M in cost-cutting measures with suppliers BAE Systems (OTCPK:BAESY) and Northrop Grumman (NYSE:NOC) to generate combined savings of $1.8B.
Mon, Sep. 15, 11:13 AM
- Northrop Grumman (NOC +0.1%) has received a $354M contract from the U.S. Air Force to expand their RQ-4 Global Hawk fleet by three aircraft.
- The contract also includes retrofit kits to add Airborne Signals Intelligence Payload sensors to two existing RQ-4.
- The new order will bring the Air Force RQ-4 fleet size to 37 in 2017, while the ASIP retrofit kits are scheduled for delivery in late 2016 and in 2017.
Wed, Sep. 10, 10:32 AM
- DARPA (Defense Advanced Research Projects Agency) has selected Northrop Grumman (NOC +0.2%) to develop advanced wideband digital antenna technology for next generation radio frequency sensors using active electronically scanned arrays.
- Under an $11.9M contract, Northrop Grumman will begin phase one of the "Arrays on Commercial Timescales" program for the DARPA Microsystems Technology Office.
- The program will design key technologies for next-generation active electronically scanned arrays by designing a reusable digital common module that contains the necessary integrated circuits.
- Key subcontractors on the Northrop Grumman "Arrays on Commercial Timescales" team are Semtech (SMTC -0.4%) and Systems & Technology Research.
Sat, Sep. 6, 8:43 AM
- The "total" yield of a company combines the dividend yield and the buyback yield - that is the yield boost from reducing the total amount of shares outstanding. Together with S&P's Howard Silverblatt, Barron's puts together a list of the top 20 companies in the S&P 500 based on "total" yield.
- While buybacks don't guarantee a strong stock - witness consistent buyback champs like IBM and Kohl's (NYSE:KSS) - Warren Buffett goes to bed at night praying for IBM's share price to go down so the company can buy back more stock for a given dollar amount (though The Oracle has said he doesn't expect this logic to win many fans).
- The flip-side are those companies - financials and energy come to mind - who tend to buy back stock at high prices only to find themselves forced to reissue it at lower prices when times get tough. A consistent plan helps, and Travelers (NYSE:TRV), under CEO Jay Fishman, has been maybe the best example of this - halving the share count since the end of 2006.
- ETFs? The Powershares Buyback Achievers Portfolio (NYSEARCA:PKW) gained 45.6% in 2013, 1,300 basis points better than the S&P 500. Since inception in 2006, it's up an annualized 9%, more than 200 basis points better than the S&P. A newcomer - the Cambria Shareholder Yield ETF (NYSEARCA:SYLD) - has beaten the S&P by about 250 basis points since its May 2013 inception.
- The list (ranked in order of "total" yield): ADT, CAM, CF, MOS, MPC, VIAB, GLW, ITW, STX, IBM, NOC, CTL, TRV, VRSN, IR, CCE, KSS, NTAP, HES, DO.
Wed, Aug. 27, 10:47 AM
- Air Force and Navy unmanned aircraft from Northrop Grumman‘s (NOC -0.2%) "high altitude long endurance series" have surpassed 100,000 hours of service in combat and operational support.
- The Air Force Global Hawk fleet logged more than 88% of the global intelligence surveillance missions, while the Navy's Broad Area Maritime Surveillance Demonstrator flew the remaining hours.
- The aircraft have been used on missions over countries including Afghanistan, Iraq, Libya and Nigeria.
NOC vs. ETF Alternatives
Northrop Grumman Corporation is a security company providing innovative systems, products and solutions in unmanned systems, cybersecurity; command, control, communications and computers (C4) intelligence, surveillance, and reconnaissance.
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