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Segment Performance to Aid Northrop Grumman (NOC) Q2 Earnings?

Northrop Grumman Corp. NOC is scheduled to release second-quarter 2021 results on Jul 29, before the opening bell.

The company’s earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 13.20%. Mixed performance delivered by its segments will get reflected in the upcoming earnings release.

Let's take a closer look at the factors likely to have influenced the company’s performance.

Mixed Segment Performance

Strong sales of manned aircraft is expected to have boosted Northrop’s Aeronautics Systems unit’s top-line performance in the second quarter.

Northrop Grumman Corporation Price and EPS Surprise

Northrop Grumman Corporation Price and EPS Surprise

Northrop Grumman Corporation price-eps-surprise | Northrop Grumman Corporation Quote

Its Space Systems segment has been delivering strong performance, driven by continued ramp-up on the GBSD program. Notably, in April 2021, Northrop supported successful launch of a United Launch Alliance (ULA) Delta IV heavy rocket. Such initiatives must have boosted Space Systems unit’s revenues in the soon-to-be-reported quarter. The Zacks Consensus Estimate for this segment’s revenues, pegged at $2,374 million, indicates an improvement of 15.9% from the prior-year quarter’s reported figure.

However, absence of its IT service business, which Northrop had divested in February, has been hurting its Defense Systems segment’s performance. A similar trend is expected to have impacted this unit’s second-quarter revenues.

The Zacks Consensus Estimate for this segment’s revenues, pegged at $2,374 million, indicates a deterioration of 26.4% from the prior-year quarter’s reported figure.

So, the effect of segmental performance on the company’s overall sales figure in the second-quarter is likely to have been mixed.

The Zacks Consensus Estimate for the company’s second-quarter 2021 sales is pegged at $8.68 billion, indicating a 2.3% decline from the year-ago quarter’s reported figure.

Earnings Expectation

Factors like lower corporate unallocated expense and the benefit from the IT services divestiture are expected to have benefited the company’s bottom-line performance in the second quarter. However, the continued spread of COVID-19 has been disrupting the supply chain, which might have hurt the company’s delivery activities, thereby impacting earnings performance.

Notably, the Zacks Consensus Estimate for second-quarter 2021 earnings is pegged at $5.75 per share, suggesting 4.3% year-over-year decline.

What the Zacks Model Unveils

Our proven model predicts an earnings beat for Northrop Grumman this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Northrop Grumman has an Earnings ESP of +0.97% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks to Consider

Here are a couple of other defense companies you may want to consider as these have the right combination of elements to post an earnings beat in their upcoming releases:

Leidos Holdings LDOS has an Earnings ESP of +4.46% and a Zacks Rank #2.

General Dynamics GD has an Earnings ESP of +1.98% and a Zacks Rank #3.

L3Harris Technologies LHX has an Earnings ESP of +0.43% and a Zacks Rank #3.

 


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Northrop Grumman Corporation (NOC): Free Stock Analysis Report

General Dynamics Corporation (GD): Free Stock Analysis Report

Leidos Holdings, Inc. (LDOS): Free Stock Analysis Report

L3Harris Technologies Inc (LHX): Free Stock Analysis Report

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

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