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Northrop Grumman Corp NOC

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Morningstar’s Analysis

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Economic Moat




We Think Northrop Can Continue Growing Regardless of the Near-Term Spending Environment

Burkett Huey, CFA Equity Analyst

Analyst Note

| Burkett Huey, CFA |

Northrop Grumman reported a strong third quarter as the company was awarded the Ground Based Strategic Deterrent contract. After increasing our growth assumptions for 2020 and slightly decreasing our assumptions for 2021, we are maintaining our $337 per share fair value estimate for the company. While we think the upcoming U.S. election will loom large over defense prime contractor stocks over the next few weeks, we think that it will be challenging to materially reduce defense spending under most electoral outcomes and that the company’s backlog of just under 9 times quarterly sales would be able to drive growth if budgets are cut.

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Company Profile

Business Description

Northrop Grumman is a defense contractor that is diversified across short-cycle and long-cycle businesses. The firm’s segments include aeronautics, mission systems, defense services, and space systems. The company’s aerospace segment creates the fuselage for the massive F-35 program and produces various piloted and autonomous flight systems. Mission systems creates a variety of sensors and processors for defense hardware. The defense systems segment is a mix between a long-range missile manufacturer and a defense IT service provider. Finally, the company’s space systems segment produces various space structures, sensors, and satellites.

2980 Fairview Park Drive
Falls Church, VA, 22042
T +1 703 280-2900
Sector Industrials
Industry Aerospace & Defense
Most Recent Earnings Sep 30, 2020
Fiscal Year End Dec 31, 2020
Stock Type Cyclical
Employees 90,000