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On Wednesday, TD Cowen analysts revised their price target for Northrop Grumman (NYSE:NOC) shares, reducing it to $480 from the previous target of $540, while maintaining a Hold rating on the stock. The adjustment follows Northrop Grumman’s first-quarter performance, which fell short of expectations due to a combination of a sales shortfall and a charge related to the B-21 bomber project. The stock has taken a significant hit, dropping nearly 14% over the past week, with the current price at $474.86. According to InvestingPro analysis, the stock appears slightly undervalued based on its Fair Value calculation.
The defense contractor, which currently generates annual revenue of $41.03 billion, reported that first-quarter sales were 22.3% of the company’s midpoint guidance for calendar year 2025 (C25), compared to the 23% forecast provided in mid-February. Analysts at TD Cowen highlighted that Northrop Grumman has kept its full-year sales outlook unchanged at $42 to $42.5 billion, suggesting a significant increase in second-half sales compared to the first half. InvestingPro data shows that 9 analysts have recently revised their earnings estimates downward for the upcoming period, reflecting growing concerns about near-term performance.
Northrop Grumman’s guidance anticipates that sales in the second half of the year will rise approximately 18% over the first half. This projection is not seen as conservative by the analysts, although they acknowledge it is within the realm of possibility. The shortfall in the first quarter was attributed to delays in material receipts and contract awards across all sectors, which may be resolved in the coming months. Despite these challenges, the company maintains a GOOD overall financial health score according to InvestingPro, which offers comprehensive analysis through its Pro Research Report, available for over 1,400 US stocks.
The company has indicated that the procurement pace is on an upward trend and that the full-year guidance relies on contracts and funding for programs already secured in calendar year 2024. While this provides a positive outlook, TD Cowen’s analysts caution that there is limited room for error, and any further delays could lead to a downward adjustment in Northrop Grumman’s guidance midpoint during the second-quarter report, potentially prolonging the negative sentiment that began with the first quarter’s underperformance. The company’s stock currently trades at a P/E ratio of 18.63, with analyst price targets ranging from $463.83 to $620, suggesting significant potential upside despite near-term challenges.
In other recent news, Northrop Grumman Corporation reported its first-quarter 2025 earnings, which revealed a significant shortfall in both earnings per share (EPS) and revenue expectations. The company’s EPS was reported at $3.32, considerably below the forecasted $6.32, while revenue amounted to $9.5 billion, falling short of the anticipated $10.6 billion. This underperformance was largely attributed to a $477 million charge related to the B-21 bomber program, impacting the company’s operating income and segment margins. Despite these challenges, Northrop Grumman has maintained its full-year sales guidance, projecting revenue between $42 billion and $42.5 billion for 2025. Analyst firms RBC Capital Markets and Truist Securities have adjusted their price targets for Northrop Grumman to $550, citing the unexpected financial impact of the B-21 program but maintaining positive ratings on the stock. Bernstein SocGen Group also reiterated a Market Perform rating with a $552 price target, acknowledging the mixed financial performance across Northrop Grumman’s segments. The company continues to focus on strategic defense projects, with expectations of long-term growth in its defense systems segment driven by strong demand for missiles and weapons.
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