We have maintained our Neutral recommendation on
Northrop Grumman Corporation
). The company currently has a Zacks Rank #3 (Hold).
Why the Reiteration?
Northrop Grumman has a strong presence in Air Force, Space
& Cyber Security programs. Its product line is well
positioned in areas like defense electronics, unmanned aircraft
and missile defense. With the successful spin-off of its
Shipbuilding business in Mar 2011, Northrop Grumman's revenue
base is heavily skewed towards programs with a short business
cycle. Moreover, the spin-off has contributed $1.4 billion to the
The positive case for Northrop Grumman stems from revenue
growth across the board, a broad diversification of programs, and
an order backlog of approximately $40.8 billion at the end of
2012. Revenue and earnings growth continue to be driven by its
strong presence in cyber security, modernization of defense and
homeland security assets, intelligence, surveillance and
reconnaissance systems, advanced electronics and software
Also, Northrop Grumman's strong balance sheet and cash flows
provide substantial financial flexibility and a cushion through
an incremental dividend, ongoing share repurchases and earnings
However, these positives are offset by apprehension regarding
defense cutbacks on high-cost platform programs, over-exposure to
the Department of Defense (DoD) budget, lower backlog, cost
over-runs and reductions in Afghanistan and Iraq operations.
Other Stocks to Consider
Other stocks worth considering are
The Boeing Company
Lockheed Martin Corporation
Rockwell Collins Inc.
), all with a Zacks Rank #2 (Buy).
BOEING CO (BA): Free Stock Analysis Report
ROCKWELL COLLIN (COL): Free Stock Analysis
LOCKHEED MARTIN (LMT): Free Stock Analysis
NORTHROP GRUMMN (NOC): Free Stock Analysis
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