Northrop Grumman Corporation Delivers for Shareholders (NOC)

Falls Church, VA-based Northrop Grumman Corporation (NYSE:NOC) announced that its board of directors has approved an increase in the quarterly dividend by 10 cents per share, bringing the annualized payout to $4 per share, up 11% from $3.60 paid earlier.

Northrop Grumman Corporation Delivers for Shareholders (NOC)Northrop Grumman’s raised quarterly dividend will amount to $1 per share from the prior payment of 90 cents. This amount will be paid on Jun 21, to shareholders of record at the close of business as on Jun 5, 2017.

Increasing dividends has become an annual ritual for this defense major. This will mark the 14th consecutive annual dividend hike by Northrop Grumman.

The current annualized dividend yield is 1.6%. The increase reflects the company’s successfully executed investment growth strategy.

Our View on Northrop Grumman

Northrop Grumman’s strong balance sheet and steady cash flow position, offer substantial financial flexibility and scope for incremental dividends, ongoing share repurchases and earnings-accretive acquisitions. In the first quarter of 2017, the company repurchased 1 million shares for $229 million. As of Mar 31, 2017, Northrop was left with $2.5 billion of share repurchase authorization. During the quarter, the company returned almost $400 million to its shareholders through share repurchase and dividends.

Notably, the company’s total shareholder return for 2016 was more than 25% and we expect to witness similar return percentage in 2017 as well. Moreover, a robust cash generation capability allows Northrop Grumman to fund capital investment programs and sustain shareholder-friendly moves.

Northrop Grumman’s first-quarter earnings and revenues beat the Zacks Consensus Estimate by a respective 25.2% and 2.5%. Both surged on a year-over-year basis. Additionally, the company raised its earnings guidance for 2017, thereby implying similar, if not greater, growth trajectory expected to be witnessed in the days ahead.

NOC Stock’s Price Movement is Below the Industry

Northrop Grumman’s stock has gained about 14.7% in the last one year, underperforming the Zacks categorized Aerospace–Defense industry’s gain of 19.9%. This could be because higher operating expenses continue to partially impact Northrop’s profit margin. The company might be challenged by economic and political factors as well.

Again, in a highly competitive environment, there are higher chances for customers to get attracted to similar products offered by Northrop’s peers at a lower price, which remains a major concern.

Furthermore, the stock’s performance lags that of Boeing Co (NYSE:BA), General Dynamics Corporation (NYSE:GD) and Huntington Ingalls Industries Inc (NYSE:HII), which have surpassed the industry mark.

Zacks Rank

Northrop Grumman currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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