Is Northrop Grumman (NOC) Undervalued As Earnings Beat And Guidance Rise?
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Northrop Grumman (NOC) has drawn fresh attention after reporting better-than-expected quarterly earnings and revenue, lifting full-year sales guidance and highlighting a record backlog following substantial contract awards across key defense programs.
See our latest analysis for Northrop Grumman.
The stronger second quarter and raised sales guidance come after a mixed stretch for Northrop Grumman’s stock, with the share price down about 10% year to date and the 1 year total shareholder return lower at 6.15%. However, the 3 and 5 year total shareholder returns of 20.77% and 58.16% point to a more supportive longer term record.
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After Northrop Grumman’s earnings beat, higher sales guidance and drop in the share price, the tension is clear. Is the recent weakness an opportunity to build a position now, or is it worth waiting for a cheaper entry?
Most Popular Narrative: 21.7% Undervalued
Based on the most followed narrative, Northrop Grumman’s fair value of about $670 sits well above the recent close near $525, which frames the current valuation gap.
The analysts have a consensus price target of $670.48 for Northrop Grumman based on their expectations of its future earnings growth, profit margins and other risk factors.
However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $815.0, and the most bearish reporting a price target of just $533.0.
Want to see what is sitting behind that valuation gap? The narrative refers to steady revenue growth, firm margins and a higher future earnings multiple. The exact mix of assumptions may surprise you.
Result: Fair Value of $670 (UNDERVALUED)
Have a read of the narrative in full and understand what’s behind the forecasts.
However, Northrop Grumman’s dependence on large U.S. defense programs and the risk of cost overruns on fixed price contracts could challenge this undervaluation story.
Find out about the key risks to this Northrop Grumman narrative.
Next Steps
With mixed signals around Northrop Grumman’s valuation and risks, do you want to rely on others, or would you rather check the data yourself and move quickly to shape your own view using the 4 key rewards and 1 important warning sign?
