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On Thursday, BTIG analyst Andre Madrid revised the price target on Northrop Grumman (NYSE:NOC) stock, reducing it to $575 from the previous $600, while maintaining a "Buy" rating. The adjustment follows a significant drop in Northrop Grumman’s share value, which fell 12.7% on April 22. This decline was noted as one of the company’s worst trading days, only surpassed by a larger drop over a decade ago on October 10, 2008. According to InvestingPro data, the stock’s total return over the past week stands at -12.54%, though it maintains a modest 1.31% gain over the past year.
The recent downturn in Northrop Grumman’s stock was attributed to additional charges on the B-21 bomber program. The company is facing increased costs due to a process change and rising material expenses. The expected loss on the first five low-rate initial production (LRIP) lots of the B-21 is now anticipated to exceed $2 billion, factoring in a $1.6 billion charge taken in the fourth quarter of 2023. Despite these challenges, InvestingPro analysis shows the company maintains strong fundamentals with a healthy EBITDA of $6.34 billion and operates with a moderate debt level.
Despite these setbacks, BTIG’s analysis suggests that Northrop Grumman’s broader business operations remain strong. The firm highlighted the company’s robust execution across its various segments, aside from the B-21 program. BTIG also pointed out that amidst growing concerns over a potential recession, Northrop Grumman could present a defensive investment option, potentially offering stability during a market downturn.
The revised price target reflects the anticipated pressure on Northrop Grumman’s free cash flow (FCF) over the coming years, which is expected due to the challenges faced in the B-21 program. BTIG reaffirmed its confidence in the company’s long-term prospects by reiterating a "Buy" rating, albeit with a lower price target to account for the recent developments.
In other recent news, Northrop Grumman Corporation reported its first-quarter 2025 earnings, revealing a significant miss on both earnings per share (EPS) and revenue forecasts. The company posted an EPS of $3.32, substantially below the expected $6.32, with revenue totaling $9.5 billion, compared to the forecasted $10.6 billion. The shortfall was largely attributed to a $477 million charge related to the B-21 bomber program, which impacted segment operating margins. Despite this setback, Northrop Grumman maintained its full-year sales guidance of $42 to $42.5 billion, with expectations of increased sales in the second half of the year. Analyst firms TD Cowen, RBC Capital Markets, and Truist Securities all adjusted their price targets for Northrop Grumman, citing the B-21 charge as a significant factor, while maintaining their respective ratings on the stock. RBC Capital Markets and Truist Securities both set a price target of $550, while TD Cowen lowered its target to $480. Despite the challenges, Northrop Grumman’s strategic defense positioning and potential budget upside were highlighted as positive factors by analysts. Additionally, the company anticipates mid-single-digit sequential growth in the second quarter, driven by strong demand for its defense systems and a growing backlog.
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