Northrop Grumman Corp.
) to beat expectations when it reports third quarter 2013 results
on Oct 23.
Why a Likely Positive Surprise?
Our proven model shows that Northrop Grumman is likely to beat
earnings because it has the right combination of two key
Positive Zacks ESP:
Expected Surprise Prediction or Earnings ESP, which represents
the difference between the Most Accurate estimate and the Zacks
Consensus Estimate, is at +2.21%. This is a meaningful and
leading indicator of a likely positive earnings surprise for the
Zacks #2 Rank (Buy):
Note that stocks with Zacks Ranks of #1, 2 and 3 have a
significantly higher chance of beating earnings. The Sell rated
stocks (#4 and 5) should never be considered going into an
The combination of Northrop Grumman's Zacks Rank #2 (Buy) and
2.21% ESP makes us confident of a positive earnings beat on Oct
What is Driving the Better than Expected
Northrop has a strong presence in Air Force, Space & Cyber
Security programs. The company's product line is well positioned
in high priority categories, such as, defense electronics,
unmanned aircraft and missile defense.
Northrop Grumman is taking several initiatives to cater to
specific customer needs in order to increase affordability and
cost competitiveness. The company is working to establish
Aerospace Design Centers of Excellence at its various centers.
These actions aim at leveraging capabilities in key areas of
manned aircraft and unmanned systems. In order to improve its
cost competitiveness, the company is closing and/or consolidating
numerous facilities. While the company's Global Hawk program is
maturing, it continues to progress well on other unmanned
programs, such as, NATO AGS and Fire Scout.
Despite the recent U.S. government shutdown and threat of
sequestration, the company continues to experience a steady flow
of contracts from the Department of Defense (DoD). Revenue and
earnings growth are driven by its strong presence in the current
focus areas of cyber security, modernization of defense and
homeland security assets, intelligence, surveillance and
reconnaissance systems, advanced electronics and software
Other Stocks to Consider
Northrop Grumman is not the only firm looking up this earnings
season. We also see likely earnings beats coming from these three
Lockheed Martin Corp.
), with Earnings ESP of +2.21% and a Zacks Rank #1 (Strong Buy).
ENGILITY HLDGS (EGL): Free Stock Analysis
GENL DYNAMICS (GD): Free Stock Analysis
LOCKHEED MARTIN (LMT): Free Stock Analysis
NORTHROP GRUMMN (NOC): Free Stock Analysis
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Engility Holdings, Inc.
), with Earnings ESP of +7.04% and a Zacks Rank #3 (Hold).
General Dynamics Corp.
), with Earnings ESP of +1.80% and a Zacks Rank #3 (Hold).