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Northrop Grumman (NOC)
NYSE:NOC

Northrop Grumman (NOC) AI Stock Analysis

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Northrop Grumman

(NYSE:NOC)

78Outperform
Northrop Grumman's strong financial performance, positive technical indicators, and favorable earnings guidance contribute significantly to the stock's score. The company shows resilience with a solid backlog and strategic growth plans, despite some challenges in specific segments. The valuation suggests reasonable pricing with moderate income potential.
Positive Factors
Defense Systems
Announced portfolio pruning and business line realignment activity suggest management is fine-tuning the Defense Systems portfolio around missile and missile defense capability.
Free Cash Flow
NOC's free cash flow outlook is intact and downside risk is abating, with free cash flow performance landing at the top of the guidance range.
International Growth
International sales tend to garner higher margins, providing Northrop Grumman yet another lever for margin expansion in the coming years.
Negative Factors
Defense Budget Cuts
Downside risks include U.S. defense budget/spending cuts, cancellations or curtailments of key programs like the B-21 or Sentinel GBSD, and competitive threats from new industry entrants.
Space Systems
Space will see a $900M headwind as NOC winds down work on the NGI and a restricted program.

Northrop Grumman (NOC) vs. S&P 500 (SPY)

Northrop Grumman Business Overview & Revenue Model

Company DescriptionNorthrop Grumman Corporation operates as an aerospace and defense company worldwide. The company's Aeronautics Systems segment designs, develops, manufactures, integrates, and sustains aircraft systems. This segment also offers unmanned autonomous aircraft systems, including high-altitude long-endurance strategic ISR systems and vertical take-off and landing tactical ISR systems; and strategic long-range strike aircraft, tactical fighter and air dominance aircraft, and airborne battle management and command and control systems. Its Defense Systems segment designs, develops, and produces weapons and mission systems. It offers products and services, such as integrated battle management systems, weapons systems and aircraft, and mission systems. This segment also provides command and control and weapons systems, including munitions and missiles; precision strike weapons; propulsion, such as air-breathing and hypersonic systems; gun systems and precision munitions; life cycle service and support for software, weapons systems, and aircraft; and logistics support, sustainment, operation, and modernization for air, sea, and ground systems. The company's Mission Systems segment offers cyber, command, control, communications and computers, intelligence, surveillance, and reconnaissance systems; radar, electro-optical/infrared and acoustic sensors; electronic warfare systems; advanced communications and network systems; cyber solutions; intelligence processing systems; navigation; and maritime power, propulsion, and payload launch systems. This segment also provides airborne multifunction sensors; maritime/land systems and sensors; navigation, targeting, and survivability solutions; and networked information solutions. Its Space Systems segment offers satellites and payloads; ground systems; missile defense systems and interceptors; launch vehicles and related propulsion systems; and strategic missiles. The company was founded in 1939 and is based in Falls Church, Virginia.
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 shows robust financial performance with strong revenue growth, improved EBIT and net profit margins, and solid cash flow generation. The balance sheet reflects a healthy capital structure with reduced leverage. However, the free cash flow to net income ratio suggests room for improvement in cash generation relative to earnings.
Income Statement
85
Very Positive
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.
Balance Sheet
80
Positive
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.
Cash Flow
78
Positive
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.
Breakdown
Dec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income StatementTotal Revenue
41.03B39.29B36.60B35.67B36.80B
Gross Profit
8.36B6.55B7.47B7.27B7.48B
EBIT
4.37B2.54B6.34B5.65B4.07B
EBITDA
4.37B4.23B7.68B8.73B5.59B
Net Income Common Stockholders
4.17B2.06B4.90B7.00B3.19B
Balance SheetCash, Cash Equivalents and Short-Term Investments
4.35B3.11B2.58B3.53B4.91B
Total Assets
49.36B46.54B43.76B42.58B44.47B
Total Debt
1.80B15.68B14.70B14.37B16.35B
Net Debt
-2.56B12.57B12.12B10.84B11.44B
Total Liabilities
34.07B31.75B28.44B29.65B33.89B
Stockholders Equity
15.29B14.79B15.31B12.93B10.58B
Cash FlowFree Cash Flow
2.62B2.10B1.47B2.15B2.88B
Operating Cash Flow
4.39B3.88B2.90B3.57B4.30B
Investing Cash Flow
-1.75B-1.58B-1.24B2.06B-1.21B
Financing Cash Flow
-1.40B-1.76B-2.61B-7.00B-432.00M

Northrop Grumman Technical Analysis

Technical Analysis Sentiment
Positive
Last Price512.30
Price Trends
50DMA
479.39
Positive
100DMA
479.02
Positive
200DMA
485.74
Positive
Market Momentum
MACD
11.15
Negative
RSI
67.13
Neutral
STOCH
81.66
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For NOC, the sentiment is Positive. The current price of 512.3 is above the 20-day moving average (MA) of 499.30, above the 50-day MA of 479.39, and above the 200-day MA of 485.74, indicating a bullish trend. The MACD of 11.15 indicates Negative momentum. The RSI at 67.13 is Neutral, neither overbought nor oversold. The STOCH value of 81.66 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive 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
HIHII
79
Outperform
$7.85B14.3312.56%2.83%0.71%-18.39%
NONOC
78
Outperform
$69.71B16.9927.75%1.67%4.44%110.33%
LHLHX
76
Outperform
$37.58B25.427.85%2.33%9.82%22.33%
GDGD
75
Outperform
$66.47B18.1717.44%2.23%12.88%13.78%
LMLMT
74
Outperform
$101.41B19.3181.04%2.91%5.14%-19.14%
62
Neutral
$7.16B12.213.05%3.43%3.62%-14.48%
BABA
39
Underperform
$104.48B-162.23%-14.49%-399.90%
* Industrials Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
NOC
Northrop Grumman
512.30
62.13
13.80%
BA
Boeing
160.82
-13.81
-7.91%
GD
General Dynamics
271.52
-12.77
-4.49%
LHX
L3Harris Technologies
214.35
12.99
6.45%
HII
Huntington Ingalls
200.08
-68.45
-25.49%
LMT
Lockheed Martin
462.24
22.07
5.01%

Northrop Grumman Earnings Call Summary

Earnings Call Date: Jan 30, 2025 | % Change Since: 6.86% | Next Earnings Date: Apr 22, 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.