On May 8, 2013, the shares of
Northrop Grumman Corp.
) climbed to a 52-week high of $77.82 primarily driven by strong
results in the first quarter of 2013. The company's top and
bottom line surpassed the Zacks Consensus Estimates primarily due
to robust operating performance as well as a lower share count.
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Operational efficiency, a large number of contracts, solid
liquidity position and effective cash deployment strategy have
led Northrop Grumman's share to attain this high. The company's
total backlog at the end of first-quarter 2013 was $39.4 billion.
Northrop Grumman's full-year 2013 earnings per share guidance is
in the range of $6.85 - $7.15. The Zacks Consensus Estimates for
full-year 2013 is $7.16, a penny higher than the upper limit of
During first-quarter 2013, Northrop Grumman's cash provided by
continuing operations was $1 million compared with cash used in
continuing operations of $105 million in the year-ago quarter. In
addition, cash and cash equivalents as of Mar 31, 2013 were $3.2
Northrop Grumman's strong liquidity allows it to improve
shareholders' value through regular dividend payments and share
buyback. In May 2012, the company increased its annual dividend
to $2.20 per share for the ninth consecutive time. Northrop
Grumman's practice of raising dividends from time to time will
benefit the stock as it attracts investor attention. In addition,
the company repurchased 6.5 million shares of its common stock
worth $456 million during the first quarter. Currently, Northrop
Grumman has share repurchase authorization of $1 billion.
The present valuation also makes Northrop Grumman attractive.
Shares of the company currently trade at 10.3x 12-month forward
earnings, a 26% discount to the peer group average of 13.9x.
Northrop Grumman's price-to-book ratio of 1.9 is at a 48.6%
discount to the peer group average of 3.7.
Northrop Grumman currently has a Zacks Rank #2 (Buy). Apart from
Northrop Grumman, other stocks in the sector that are worth
) with a Zacks Rank #1 (Strong Buy), and
Huntington Ingalls Industries, Inc.
Wesco Aircraft Holdings, Inc.
) with a Zacks Rank #2 (Buy).