Northrop (NOC) Set to Beat Earnings Estimates - Analyst Blog

By Zacks Equity Research,

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We expect Northrop Grumman Corp. ( NOC ) 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 ingredients.

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 shares.

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 earnings announcement.  

The combination of Northrop Grumman's Zacks Rank #2 (Buy) and 2.21% ESP makes us confident of a positive earnings beat on Oct 23, 2013.

What is Driving the Better than Expected Earnings?

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 development.

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 industry peers:

Lockheed Martin Corp. ( LMT ), with Earnings ESP of +2.21% and a Zacks Rank #1 (Strong Buy).

Engility Holdings, Inc. ( EGL ), with Earnings ESP of +7.04% and a Zacks Rank #3 (Hold).

General Dynamics Corp. ( GD ), with Earnings ESP of +1.80% and a Zacks Rank #3 (Hold).

ENGILITY HLDGS (EGL): Free Stock Analysis Report

GENL DYNAMICS (GD): Free Stock Analysis Report

LOCKHEED MARTIN (LMT): Free Stock Analysis Report

NORTHROP GRUMMN (NOC): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Stocks: EGL , GD , LMT , NOC

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