Earnings season rolls along, and this time the Aerospace and Defense industry is up to bat. From Boeing Co (NYSE:BA) to United Technologies Corporation (NYSE:UTX), several of the big players have reported their latest quarterly results and many of them have surpassed analysts’ sales and earnings expectations.
However, that alone isn’t enough to warrant a buy recommendation from me.
So, today let’s go over what I consider one of the strongest defense stocks out there, as well as four defense plays to avoid this earnings season.
Northrop Grumman Corporation (NYSE:NOC)
Shares of Northrop Grumman Corporation (NYSE:NOC) was rising yesterday after the NOC fourth-quarter results walloped the consensus estimate.
Northrop Grumman earnings increased 5.86% to $506 million, or $2.48 per share, up from $478 million, or $2.12 per share in Q4 2013. Adjusted earnings-per-share was $2.26, while sales were $6.1 billion.
Analysts were expecting EPS of $2.25 on $5.99 billion in sales. So, Northrop Grumman posted a slights earnings and sales surprise.
For full-year 2014, Northrop Grumman reported that sales were $24 billion, while earnings totaled $2.1 billion, or $9.75 per share. That’s up from earnings of $2 billion, or $8.35 per share, in 2013. NOC also noted that its backlog at the end of 2014 was $38.2 billion, up from $37 billion at the end of 2013. Northrop Grumman was awarded $25 billion last year, and its book-to-bill was 104%.
The real highlight of the NOC stock’s report, though, was its 2015 guidance. Northrop Grumman expects earnings per share between $9.20 and $9.50, which is well above the consensus estimate for $9.11 per share.
I consider NOC stock a B-rated “buy,” but it could very well get upgraded to an A-rating once the latest results have been plugged into Portfolio Grader.
Steer Clear of BA, COL, TXT, UTX
And while you take a closer look at NOC stock, know that Boeing, Rockwell Collins, Inc. (NYSE:COL), Textron Inc. (NYSE:TXT) and United Technologies are not looking nearly as good.
Here are the grades for the four defense contractors that I don’t recommend for new money right now:
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
