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  • Will lower spending help Northrop Grumman (NOC) in third quarter results? – October 25, 2021

Will lower spending help Northrop Grumman (NOC) in third quarter results? – October 25, 2021

By on October 25, 2021 0

Northrop Grumman Corp. (CNO Free Report) is expected to release third quarter 2021 results on October 28, before the opening bell.

Company profits have beaten Zacks’ consensus estimate over the past four quarters, with the average surprise being 13.08%. The mixed performance of its segments should be reflected in the next publication of results.

Let’s take a closer look at the factors that may have impacted the performance of the business.

Mixed segment performance

While strong sales of its manned aircraft are expected to have boosted the performance of Northrop’s aviation systems unit in the third quarter, lower A350 production activity compared to the period a year earlier may have had a negative impact on the same.

Zacks’ consensus estimate for segment revenue, valued at $ 2,892 million, indicates a decrease of 0.8% from the figure reported in the previous year quarter.

Northrop Grumman Corporation price and BPA surprise

Its Space Systems segment is expected to post a solid performance again in the third quarter, driven by the continued ramp-up of the GBSD program. Zacks’ consensus estimate for segment revenue, valued at $ 2,539 million, indicates a 7.3% improvement over the figure reported in the prior year quarter.

However, the absence of its IT services business, which Northrop divested in February, hurt the performance of its Defense Systems segment. A similar trend is expected to have impacted this unit’s revenue in the third quarter.

Zacks’ consensus estimate for segment revenue of $ 1,422 million indicates a deterioration of 23.5% from the figure reported in the previous year quarter.

Thus, the effect of segmental performance on the company’s overall revenue in the third quarter is likely to have been mixed.

Zacks’ consensus estimate for the company’s third quarter 2021 sales is set at $ 8.84 billion, indicating a 2.6% decline from the figure released a year ago.

Income expectation

Lower unallocated business spending driven by state tax changes is expected to have benefited the company’s bottom line in the third quarter. However, a higher federal tax rate as well as the impact of the divestiture of IT services could have tainted the effect of favorable factors, thus affecting its results.

Notably, Zacks’ consensus estimate for third quarter earnings is set at $ 5.93 per share, suggesting a mere 0.7% increase from the figure released a year ago.

What the Zacks model reveals

Our proven model does not conclusively predict an increase in profits for Northrop Grumman this time around. The combination of a positive earnings ESP and a Zacks # 1 (strong buy), 2 (buy), or 3 (hold) ranking increases the odds of beating the winnings. That’s not the case here.

Northrop Grumman has an ESP on earnings of 0.00% and a Zacks # 3 rank. You can discover the best stocks to buy or sell before they are flagged with our ESP Earnings Filter.

Actions to consider

Here are a few defense companies you might want to consider, as they have the right mix of elements to show a profit beat this season:

Transdigme Group (TDG Free Report) has an ESP on revenue of + 0.36% and a Zacks # 2 rank. You can see The full list of today’s Zacks # 1 Rank stocks here.

CAE inc (CAE Free Report) has + 9.46% Revenue ESP and Zacks # 3 Rank.

Huntington ingalls (HII Free Report) has an ESP on revenue of + 3.59% and a Zacks # 2 rank.


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