Earnings season is really kicking into high gear. This is when we separate the wheat from the chaff, and this morning, a major defense contractor revealed its fourth-quarter earnings and sales results before the stock market opened. In today’s blog, we’ll take a look at what this company had to say and how you can profit from their report.
Founded in 1939, Northrop Grumman Corp. (NOC) is a major defense contractor based in Falls Church, Virginia and serving the U.S. and 25 other nations. As a security company, Northrop Grumman provides systems, products, and solutions in aerospace, electronics, information systems, and technical service areas to government and commercial customers worldwide.
The company’s Aerospace Systems segment designs, develops, integrates, and produces manned aircraft, unmanned systems, spacecraft, high-energy laser systems, microelectronics, and other systems and subsystems. This segment sells its products primarily to government agencies for use in various areas, including intelligence, surveillance, reconnaissance and many others.
NOC’s Electronic Systems segment offers solutions for sensing, understanding, anticipating, and controlling the operating environment to military, civil, and commercial customers, while the company’s Information Systems segment offers advanced solutions for the U.S. Department of Defense, national intelligence, federal, civilian, state, international and commercial customers. This segment provides products and services primarily in the fields of command and control, communications, cyber, air and missile defense, intelligence processing and more.
Finally, Northrop Grumman’s Technical Services segment provides logistics, modernization, and sustainment services, as well as other advanced technology and engineering services, including space, missile defense, nuclear security, training and simulation services.
This morning, the company reported earnings of $178 million, or $1.01 per share. Adjusted earnings per share fell 4.7% year-over-year to $2.82. Sales rose 4% year-over-year to $6.63 billion, compared to $6.40 billion in the year ago period. Sales were boosted by the company’s Mission Systems and Aerospace Systems business. Analysts were expecting earnings of $2.74 per share on $6.35 billion in sales, so NOC posted a 2.9% earnings surprise and a 4% sales surprise.
The company attributes the year-over-year reduction in quarterly earnings to temporarily higher tax expenses resulting from corporate tax reform. However, the company is anticipating higher capital expenditures this year, which "reflect the benefits of tax reform, which allow the company to increase investments in programmatic requirements and other capital projects."
For the first quarter of 2018, analysts are looking for a 1.1% decrease in annual earnings and 4.9% annual sales growth. Looking ahead to full-year 2018, Northrop Grumman expects earnings per share in the range of $15.00 and $15.25, on approximately $27 billion in sales. That’s slightly higher than the current consensus estimate for earnings of $14.24 per share on $26.91 billion in sales. As a result, NOC shares bounced about 1% this morning.
Overall, this was a solid report. And that’s precisely why NOC maintains an A-rating in my Portfolio Grader tool. This means my readers know Northrop Grumman is a Strong Buy, and many of them were prepared for this morning’s bounce in share price.
However, only Blue Chip Growth members know the exclusive Buy Below price my system recommends today for NOC, and when the stock price jumps like it did this morning, you want to be sure you’re buying at a price the company’s fundamentals can sustain. That’s why if you’re interested in owning this top defense stock, I urge you to join Blue Chip Growth today.
If you aren’t ready to join Blue Chip Growth, though, I urge you to stay tuned into this blog where I’ll continue revealing my insights on many of my favorite companies throughout earnings season.