Northrop Grumman is a leading aerospace and defence technology company, delivering a broad range of products, services and solutions to government and commercial customers in the US and internationally. The company's primary focus is the US Department of Defence (DoD), with a broad portfolio aligned to support US national security priorities.
Growth over the past five years has been strong, with revenue and earnings improving around 7% and 14% per year. Earnings over FY22, however, came under a bit of pressure due to lower profitability on its B-21 Raider as well as lower aerospace margins. Nevertheless, the outlook going forward is positive, with various operational headwinds seeming to have subsided.
Technically, the stock is displaying signs of price symmetry (see the shaded area on the first chart). In essence, the stock is displaying a consistent and proportionate symmetrical pattern, mirroring the previous price trajectory. For a bullish trend in particular, symmetry reinforces buyer's expectations of price appreciation, further supporting the price.
The stock is trading just below its 200-day simple moving average (SMA) of ~$452 but remains above key support. Buying pressure is present and can support a sustained break toward the upside. Fading downside momentum, according to the MACD indicator, sidewards movement of the On-Balance Volume indicator, as well as a series of green candlesticks on the Heiken-Ashi indicator, all support a bullish stance.
Share Information
| Share code | NOC US |
|---|---|
| Industry | Aerospace & Defence |
| Market Capital (USD) | 63.56 billion |
| One Year Total Return | -12.07% |
| Return Year-to-date | -22.06% |
| Current Price (USD) | 420.07 |
| 52 Week High (USD) | 556.27 |
| 52 Week Low (USD) | 416.71 |
| Financial Year End | December |
| The stock is trading near its 52-week lows, though various technical indicators point toward a possible recovery to the upside. |
Consensus expectations
(Bloomberg)
| FY22 | FY23E | FY24E | FY25E | |
|---|---|---|---|---|
| Headline Earnings per Share (USD) | 25.54 | 22.68 | 24.70 | 28.05 |
| Growth (%) | -11.20 | 8.90 | 13.55 | |
| Dividend Per Share (USD) | 6.76 | 7.19 | 7.79 | 8.43 |
| Growth (%) | 6.33 | 8.36 | 8.24 | |
| Forward PE (times) | 17.33 | 15.41 | 14.36 | |
| Forward Dividend Yield (%) | 1.82 | 1.97 | 2.14 | |
| The market anticipates a slow-down in growth this year, but a decent recovery over the medium-term. | ||||
Buy/Sell Rationale
Technical Analysis:
Long-term fundamental view:
| Share Name and position | BTAL - Buy (Continue to hold) |
CNC - Buy (Continue to hold) |
UNH - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 19.20 | 66.44 | 505.45 |
| Current | 20.30 | 69.02 | 516.23 |
| Movement | 5.7% | 3.9% | 2.1% |
|
The development of a falling wedge pattern remains of interest. The stock just crossed above its 200-day simple moving average, with upside momentum remaining supportive.
Our profit target is $21 with a stop-loss of $19.60. Exit the position on 13 December 2023. |
The stock remains above key support levels and continues to test its 200-day simple moving average. Upside momentum remains supportive.
Our profit target is $76 with a trailing stop-loss of $65.30. Exit the position on 30 November 2023. |
The price is stable and remains of interest. Trade continues above the 200-day simple moving average and upside momentum remains supportive.
Our profit target is $560 with a trailing stop-loss of $494.50. Exit the position on 3 January 2024. |
| Share Name and position | STRA - Buy (Continue to hold) |
EZPW - Buy (Continue to hold) |
AZO - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 76.64 | 8.28 | 2 556.06 |
| Current | 78.08 | 8.36 | 2 521.68 |
| Movement | 1.9% | 1% | -1.3% |
|
The stock is in the accumulation phase of the market cycle but remains below its 200-day simple moving average. Upside momentum has regained some strength, and this is encouraging.
Our profit target is $85 with a trailing stop-loss of $73.80. Exit the position on 22 November 2023. |
Price action near the lower range of an inclining channel pattern remains of interest. The stock is trading below its 200-day simple moving average, and we maintain the counter-trend strategy. Fading downside momentum is supportive.
Our profit target is $9.25 with a trailing stop-loss of $7.90. Exit the position around 10 January 2023. |
The formation of an incomplete broadening top pattern remains attractive. The stock continues to test its 200-day simple moving average. Fading upside momentum, however, is a concern.
Our profit target is $2 800 with a stop-loss of $2 457. Exit the position around 8 November 2023. |
