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Northrop Grumman Corp. (NOC)
:NOC
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Northrop Grumman
(NYSE:NOC)79Outperform
Positive Factors
Free Cash Flow
Free cash flow is expected to trend higher, driven by operating performance and working capital improvements.
International Growth
International sales tend to garner higher margins, providing Northrop Grumman yet another lever for margin expansion in the coming years.
Negative Factors
Space Systems
Space Systems faces the $900MM NGI/Classified contract sunset.
Northrop Grumman (NOC) vs. S&P 500 (SPY)
Market Cap
$67.14B
Dividend Yield1.7%
Average Volume (3M)1.07M
Price to Earnings (P/E)16.4
Beta (1Y)0.32
Revenue Growth4.44%
EPS Growth110.33%
CountryUS
Employees97,000
SectorIndustrials
Sector Strength66
IndustryAerospace & Defense
Share Statistics
EPS (TTM)28.41
Shares Outstanding144,755,660
10 Day Avg. Volume1,270,047
30 Day Avg. Volume1,069,079
Financial Highlights & Ratios
PEG Ratio0.15
Price to Book (P/B)N/A
Price to Sales (P/S)1.67
Price to Cash Flow (P/CF)6.70
P/FCF Ratio6.30
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$542.62Price Target Upside16.99% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering17
Northrop Grumman Business Overview & Revenue Model
Company DescriptionNorthrop Grumman Corporation (NOC) is a leading global aerospace and defense technology company. The company is renowned for its expertise in the development and production of innovative systems for various sectors, including aerospace, information technology, electronics, space, and defense. Northrop Grumman delivers advanced solutions for government and commercial customers worldwide, with a strong emphasis on cybersecurity, autonomous systems, and precision weapons. Its core products and services include military aircraft, missile defense systems, space systems, and advanced electronic warfare solutions.
How the Company Makes MoneyNorthrop Grumman makes money primarily through government contracts, particularly with the U.S. Department of Defense, which constitutes a significant portion of its revenue. The company is involved in long-term contracts to supply advanced defense systems, aircraft, and related services. It also earns revenue through international sales to allied nations, providing defense and aerospace systems tailored to specific requirements. Additionally, Northrop Grumman benefits from partnerships and collaborations with other leading defense contractors, expanding its reach and capabilities in areas like cybersecurity and space technology. The company's revenue model is heavily reliant on securing and executing defense and aerospace contracts, where it leverages its technological expertise and innovation to maintain a competitive edge.
Northrop Grumman Financial Statement Overview
Summary
Northrop Grumman displays robust financial performance with strong revenue growth, improved EBIT and net profit margins, a healthy balance sheet with reduced leverage, and solid cash flow generation. However, there is room for improvement in free cash flow relative to net income.Income Statement
Northrop Grumman has demonstrated strong revenue growth with a 4.44% increase from 2023 to 2024. The EBIT margin has improved significantly over the past year to 10.65%, indicating enhanced operational efficiency. The net profit margin also increased to 10.17%, reflecting effective cost management and profitability.85
Very Positive
Balance Sheet
The company's balance sheet shows a healthy equity ratio of 30.98%, indicating a solid capital structure. The debt-to-equity ratio has improved, reducing leverage risk. Return on equity stands at a robust 27.29%, showcasing effective utilization of shareholder funds.80
Positive
Cash Flow
The operating cash flow to net income ratio is 1.05, demonstrating a strong conversion of income to cash. Free cash flow has grown by 24.81% from 2023 to 2024, indicating good cash generation. However, the free cash flow to net income ratio of 0.63 suggests room for improvement in cash generation relative to earnings.78
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 41.03B | 39.29B | 36.60B | 35.67B | 36.80B | Gross Profit |
| 8.36B | 6.55B | 7.47B | 7.27B | 7.48B | EBIT |
| 4.37B | 2.54B | 6.34B | 5.65B | 4.07B | EBITDA |
| 4.37B | 4.23B | 7.68B | 8.73B | 5.59B | Net Income Common Stockholders |
| 4.17B | 2.06B | 4.90B | 7.00B | 3.19B |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 4.35B | 3.11B | 2.58B | 3.53B | 4.91B | Total Assets |
| 49.36B | 46.54B | 43.76B | 42.58B | 44.47B | Total Debt |
| 1.80B | 15.68B | 14.70B | 14.37B | 16.35B | Net Debt |
| -2.56B | 12.57B | 12.12B | 10.84B | 11.44B | Total Liabilities |
| 34.07B | 31.75B | 28.44B | 29.65B | 33.89B | Stockholders Equity |
| 15.29B | 14.79B | 15.31B | 12.93B | 10.58B |
| Cash Flow | Free Cash Flow | |||
| 2.62B | 2.10B | 1.47B | 2.15B | 2.88B | Operating Cash Flow |
| 4.39B | 3.88B | 2.90B | 3.57B | 4.30B | Investing Cash Flow |
| -1.75B | -1.58B | -1.24B | 2.06B | -1.21B | Financing Cash Flow |
| -1.40B | -1.76B | -2.61B | -7.00B | -432.00M |
Northrop Grumman Technical Analysis
Neutral
463.83
Price Trends
467.83
Negative
484.75
Negative
478.74
Negative
Market Momentum
-3.41
Negative
50.90
Neutral
84.80
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For NOC, the sentiment is Neutral. The current price of 463.83 is above the 20-day moving average (MA) of 457.59, below the 50-day MA of 467.83, and below the 200-day MA of 478.74, indicating a neutral trend. The MACD of -3.41 indicates Negative momentum. The RSI at 50.90 is Neutral, neither overbought nor oversold. The STOCH value of 84.80 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for NOC.
Northrop Grumman Risk Analysis
Northrop Grumman disclosed 21 risk factors in its most recent earnings report. Northrop Grumman reported the most risks in the “Production” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Northrop Grumman Peers Comparison
Overall Rating
UnderperformOutperform
Sector (62)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
79 Outperform | $67.14B | 16.37 | 27.30% | 1.70% | 4.44% | 110.33% | |
75 Outperform | $68.68B | 18.64 | 17.14% | 2.23% | 12.88% | 13.78% | |
74 Outperform | $105.65B | 20.12 | 84.26% | 2.82% | 5.14% | -19.14% | |
71 Outperform | $38.81B | 26.17 | 7.70% | 2.23% | 9.82% | 22.33% | |
64 Neutral | $13.64B | 17.26 | 11.44% | 0.11% | 0.14% | -5.38% | |
62 Neutral | $8.11B | 13.34 | 1.17% | 3.02% | 4.16% | -15.14% | |
50 Neutral | $130.99B | ― | -162.23% | ― | -14.49% | -399.90% |
* Industrials Sector Average
Performance Comparison
NOC
Northrop Grumman
463.83
13.32
2.96%
BA
Boeing
158.90
-42.24
-21.00%
GD
General Dynamics
250.80
-17.38
-6.48%
LHX
L3Harris Technologies
207.08
-2.47
-1.18%
LMT
Lockheed Martin
448.82
27.88
6.62%
TXT
Textron
70.19
-19.07
-21.36%
Northrop Grumman Earnings Call Summary
Earnings Call Date: Jan 30, 2025 | % Change Since: -3.25% | Next Earnings Date: Apr 24, 2025
Earnings Call Sentiment Positive
Northrop Grumman's earnings call reflected strong financial performance with record backlog achievements and significant growth in sales and margins. However, there were challenges, including underperformance in the space segment and pension asset returns falling short of expectations. The divestiture of the training services business also indicated strategic realignment. Overall, the company demonstrated resilience and strategic positioning for future growth.Highlights
Record Backlog Achievement
Northrop Grumman set a new record backlog of approximately $91.5 billion with a book-to-bill ratio of 1.23 times, driven by significant new competitive wins including the TACOMO program and the second LRIP lot on B-21.
Sales and Margin Growth
2024 sales increased by more than 4%, with organic top-line growth of 30% over the last five years. Segment operating margins expanded, with segment operating income over $4.5 billion and a margin rate of 11.1%.
Free Cash Flow Increase
Free cash flow increased by 25% year-over-year to over $2.6 billion, hitting the high-end of the guidance range.
Microelectronics Growth
The microelectronics business grew over 20% in 2024, driven by innovative technologies like the world-record-setting terahertz microchip.
Strong International Demand
International book-to-bill ratio was 1.4 times, with expectations for international business to accelerate and grow faster than U.S. sales in 2025.
Lowlights
Space Segment Sales Decline
2024 sales in the space segment were down modestly due to the wind down of a restrictive program in NGI. The remaining space portfolio grew at mid-single digits.
Divestiture of Training Services Business
Northrop Grumman decided to exit the training services business, selling it to Serco, Inc. for $327 million.
Pension Asset Returns Below Expectations
Asset returns in 2024 were 4.7%, below the long-term expected rate of return of 7.5%.
Company Guidance
During Northrop Grumman's Fourth Quarter 2024 Conference Call, the company provided guidance for 2025, highlighting expectations for continued growth. The company ended 2024 with a record backlog of approximately $91.5 billion and a book-to-bill ratio of 1.23 times. For 2025, Northrop Grumman anticipates organic sales growth between 3% and 4%, driven by international sales expected to outpace U.S. sales. The company projects segment margins to expand by roughly 10 basis points and forecasts double-digit free cash flow growth, with a mark-to-market adjusted EPS target of $28.05 at the midpoint. Anticipated capital expenditures for 2025 are $1.5 billion, while the company plans to return 100% of its free cash flow to shareholders. Northrop Grumman's strategic focus remains on innovation, operational excellence, and leveraging advanced manufacturing techniques to sustain growth and enhance margins.Northrop Grumman Corporate Events
Executive/Board ChangesShareholder Meetings
Northrop Grumman Sets 2025 Executive Compensation Goals
Neutral
Feb 19, 2025
On February 18, 2025, Northrop Grumman’s Board approved compensation-related actions for its executives, setting 2025 goals under the Incentive Compensation Plan with financial and non-financial metrics. The Board also awarded Restricted Performance Stock Rights and amended the Severance Plan to reduce the severance timeframe and adjust bonus determination. Additionally, Graham Robinson announced he will not seek re-election to the Board at the 2025 Annual Meeting.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.