Bernstein maintains Northrop Grumman stock with $552 target

On Wednesday, Northrop Grumman Corporation (NYSE:NOC) received a reiterated Market Perform rating and a $552.00 price target from Bernstein SocGen Group, following the release of its first-quarter earnings. The defense contractor reported a diluted earnings per share (EPS) of $3.32, which was notably lower than the consensus estimate of $6.28. The disappointing results triggered a sharp 13.7% decline in the stock price over the past week, according to InvestingPro data, which also shows nine analysts have recently revised their earnings estimates downward. The decrease in EPS was primarily due to an after-tax loss of $397 million from five Low Rate Initial Production (LRIP) options on the B-21 bomber, attributed to escalating manufacturing costs.

Northrop Grumman’s revenues for the quarter amounted to $9.5 billion, falling short of the $9.9 billion consensus and Bernstein’s projection of $10.2 billion. Despite the miss, InvestingPro analysis shows the company maintains strong fundamentals with a "GOOD" overall financial health score and operates with a moderate debt level. At the segment level, the company’s financial performance was mixed. It saw lower-than-expected revenues in Aeronautics, Defense Systems, and Space Systems, while revenues in Mission Systems met estimates. The shortfall in Aeronautics was linked to reduced sales on the B-21 and other restricted programs, as well as a decline in F-35 sustainment volume.

The segment operating margin stood at 6.0%, which was below Bernstein’s estimate of 10.8%. The Aeronautics and Mission Systems segments experienced lower margins, whereas Space Systems and Defense Systems surpassed Bernstein’s margin estimates. The Aeronautics segment in particular was affected by a $477 million loss provision related to the LRIP phase of the B-21 program.

Despite these challenges, Northrop Grumman maintained its revenue and free cash flow (FCF) margin guidance. This suggests that the company anticipates recovering from the current setbacks as the year progresses. The B-21 program, a pivotal part of Northrop Grumman’s portfolio, will continue to be a focus area for the company as it navigates through the manufacturing complexities and aims to meet its financial targets for the upcoming quarters. As a prominent player in the Aerospace & Defense industry, Northrop Grumman has demonstrated long-term stability through 55 consecutive years of dividend payments, with 21 straight years of dividend increases. For deeper insights into NOC’s valuation and growth prospects, access the comprehensive Pro Research Report available on InvestingPro, which covers over 1,400 top US stocks.

In other recent news, Northrop Grumman Corporation reported a significant miss in its first-quarter 2025 earnings, falling short of expectations with an earnings per share (EPS) of $3.32 compared to the anticipated $6.32. The company’s revenue also came in below forecasts at $9.5 billion, against the expected $10.6 billion. This earnings miss was accompanied by a notable $477 million adjustment related to the B-21 program, which impacted the segment operating margin. Despite these setbacks, Northrop Grumman reaffirmed its full-year sales guidance, projecting sales between $42 billion and $42.5 billion for 2025. The company also expects mid-single-digit sequential growth in the second quarter and a sales ramp in the latter half of the year. Additionally, Northrop Grumman has been expanding its international footprint, with international sales now representing approximately 14% of total sales. The company continues to see strong demand signals from global customers, resulting in a record backlog of $92.8 billion.

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