Earlier in the year, when the government sequester was announced, many feared the worst for the economy. When the sun rose the next day and stores opened and people still went to work, though, fears of the sequester’s impact started to abate.
As it turns out, investors relaxed too soon. The military is finally starting to tighten the purse strings, and that’s making life really difficult for Northrop Grumman (NOC).
Just to be clear, Northrop Grumman is still winning new contracts. But it’s losing a lot of them, too … big ones, including a contract to maintain the Air Force’s ICBMs, which was a worth $6.5 billion. Now BAE Systems will be doing the work. The F-35 program is also reported to be on the chopping block, for which Northrop Grumman makes the communications and navigation systems.
Yep, life’s starting to get real tough for Northrop Grumman, and that 2.5% yield may not be growing much in the foreseeable future.
As of this writing, James Brumley does not have a position in any of the aforementioned securities.