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Northrop Grumman (NOC) to Report Q1 Earnings: What's in Store?

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Northrop Grumman Corp. (NOC - Free Report) is scheduled to release first-quarter 2021 results on Apr 29, before the opening bell.

In the last reported quarter, the company delivered an earnings surprise of 15.61%. The company’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters while missing in the remaining one, the average surprise being 6.99%.

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

Factors Under Consideration

We observed no significant news for product delivery from Northrop Grumman during the first quarter of 2021, in comparison to the deliveries made in the previous few quarters. Such low deliveries are likely to have marred the company’s first-quarter revenues.

Meanwhile, due to the adverse impacts of COVID-19 on commercial aerospace, lower sales of commercial aerostructures might have affected Northrop Grumman’s top-line performance, while large franchise programs like F-35, E-2D, and B-21 are expected to have contributed favorably as defense programs remained cushioned by government support.

Furthermore, at the fourth quarter's earnings call, the company's management revealed its expectations for the first-quarter revenues to be marginally less than 25% of full-year revenues. This is likely to get reflected in its top-line performance in the to-be-reported quarter.

The Zacks Consensus Estimate for the company’s first-quarter 2021 sales is pegged at $8.53 billion, indicating a 1.1% decline from the year-ago quarter’s reported figure.

In the month of February, Northrop Grumman closed the sale of its IT services business to Peraton for $3.4 billion in cash. Such a major divestment might have been recognized as a gain on sale on the company’s first-quarter income statement, therefore boosting its bottom-line performance. Moreover, the company’s consistent cost-reduction initiatives are likely to have aided its quarterly earnings as well.

Notably, the Zacks Consensus Estimate for first-quarter 2021 earnings is pegged at $5.48 per share, suggesting 6.4% year-over-year growth.

In February, Northrop Grumman announced an accelerated share repurchase (ASR) agreement with Goldman Sachs & Co. LLC, a subsidiary of The Goldman Sachs Group, for $2 billion of Northrop Grumman’s common stock. In January 2021, Northrop Grumman’s board of directors authorized a new share repurchase program of up to an additional $3 billion of its common stock, taking the total outstanding authorization to $5.8 billion.

We may expect the company’s balance sheet to duly reflect this share repurchase in the upcoming results.  

Q1 Backlog

Northrop Grumman has been witnessing a steady flow of orders from both Pentagon and its foreign allies, courtesy of the demand for its varied range of military offerings. Notably, during the first quarter, it secured a handful of multi-million-dollar contracts, including a $3.9-billion for designing the next-generation interceptor for the U.S. missile defense network. This is expected to get reflected in the company's backlog count for the quarter under review.

What the Zacks Model Unveils

Our proven model does not conclusively predict 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 beat but this is not the case here. 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 -1.28% and a Zacks Rank #4 (Sell).

Northrop Grumman Corporation Price and EPS Surprise

Stocks to Consider

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

The Boeing Company (BA - Free Report) has an Earnings ESP of +5.55% and a Zacks Rank #3, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Triumph Group, Inc. (TGI - Free Report) has an Earnings ESP of +9.80% and a Zacks Rank #3.  

A Recent Defense Release

Lockheed Martin Corp. (LMT - Free Report) reported first-quarter 2021 earnings of $6.56 per share, which surpassed the Zacks Consensus Estimate of $6.32 by 3.8%.

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