Northrop Grumman Corp. (NYSE:) is scheduled to release fourth quarter and 2018 results on Jan 31, before the opening bell.
In the last reported quarter, the company delivered a positive earnings surprise of 50.34%. Impressively, Northrop Grumman outperformed the Zacks Consensus Estimate in the trailing four quarters, with the average positive surprise being 17.87%.
Let's take a closer look at the factors influencing Northrop Grumman’s quarterly results.
Why a Likely Positive Earnings Surprise
Our proven model shows a likely earnings beat for Northrop Grumman this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is the case here as you will see below.
Earnings ESP: Northrop Grumman has an Earnings ESP of +2.02%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Northrop Grumman currently sports a Zacks Rank #1, which when combined with a positive ESP makes us confident of probable earnings beat.
Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is
seeing negative estimate revisions.
Northrop Grumman Corporation Price and EPS Surprise
Northrop Grumman Corporation Price and EPS Surprise | Northrop Grumman Corporation Quote
Strong Order Growth to Boost Backlog
In the fourth quarter of 2018, Northrop Grumman clinched some huge contracts. Its business subsidiary, Northrop Grumman Systems Corp. clinched two massive contracts. While one of the contracts was worth $3.6 billion for delivering U.S. Air Force with LAIRCM equipment, the other was a
$1.3 billion deal for the company’s LITENING system.
Northrop Grumman also received other significant contracts during the quarter. These contract wins should duly get reflected in the form of increased backlogs in the upcoming quarterly results.
Aerospace Systems: A Key Catalyst
The Aerospace Systems segment has been a major revenue growth catalyst for the company and is anticipated to retain its usual trend in the to-
be-reported quarter. In particular, ramped up production volumes for F-35 is expected to boost this segment’s top line.
The company is on track to deliver 116 F-35 center fuselages by the end of 2018, reflecting a 25% annual increase. This should instill notable growth to this segment. In line with this, the Zacks Consensus Estimate for revenues of this unit in the fourth quarter is pegged at $3,259 million, reflecting year- over-year growth of 8.5%.
Revenue growth at the Aerospace Systems segment along with that in the Technology Services unit has made us optimistic about Northrop Grumman’s top-line growth in the fourth quarter. Notably, the Zacks Consensus Estimate for its fourth-quarter revenues is pegged at $8,109 million, reflecting year-over-year improvement of 22.2%.
A View on the Bottom Line
Based on the strong performance registered by the company in the third quarter, Northrop Grumman increased earnings and free cash flow guidance for 2018 during the third-quarter earnings call. The company expects to deliver strong margin rates and operating income growth at its segments. Considering this, we may expect the company’s fourth-quarter results to reflect a solid bottom-line performance.
In line with this, the Zacks Consensus Estimate for fourth-quarter earnings is pegged at $4.45, reflecting a massive 57.8% surge year over year.
Other Stocks That Warrant a Look
Here are a few more companies in the Zacks Aerospace Sector that have the right combination of elements to post an earnings beat this quarter.
Lockheed Martin Corp. (NYSE:) is expected to report fourth-quarter 2018 results on Jan 29. The company has an Earnings ESP of +4.20% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
General Dynamics Corp. (NYSE:) is expected to report fourth-quarter 2018 results on Jan 30. The company has an Earnings ESP of +1.49% and a Zacks Rank #3.
Huntington Ingalls Industries (NYSE:) is expected to report fourth-quarter 2018 results on Feb 14. The company has an Earnings ESP of +7.09% and a Zacks Rank #3.
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