Analyst Note| Burkett Huey, CFA |
Northrop Grumman reported a strong first quarter. While operating results were somewhat obscured by a large noncash gain on its sale of an IT business, the underlying business continues to perform well. Sales grew 6.2%, and transaction-adjusted earnings per share grew 28% to $6.57 per share. Management repurchased $2 billion worth of shares, which reduced the diluted share count by about 3.0% this quarter, and we think this repurchase was mostly value-accretive as the firm was trading materially below our fair value for much of the quarter. We’re raising our fair value estimate for Northrop by about 1% to $334 per share, mostly due to a time value of money adjustment.