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Northrop Grumman To See Steady Growth In 2025 Despite Challenges, Says Analyst
NOCNorthrop Grumman(NOC) Benzinga·2025-01-31 19:14

Core Viewpoint - Truist Securities analyst Michael Ciarmoli maintains a Buy rating on Northrop Grumman Corp (NOC) with a price target of 545,highlightingexpectationsforgrowthintheSpaceSystemssegmentandoverallmarginimprovementin2025[1][4].Group1:FinancialPerformance−NorthropGrummanreportedfourth−quartersalesof545, highlighting expectations for growth in the Space Systems segment and overall margin improvement in 2025 [1][4]. Group 1: Financial Performance - Northrop Grumman reported fourth-quarter sales of 10.686 billion, remaining flat year over year, with an MTM-adjusted earnings per share of 6.39[1].−ManagementanticipatesrevenuestoremainroughlyunchangedinQ12025,withgrowthexpectedtoreturninthesecondhalfof2025,particularlyintheSpaceSystemssegment,whichisprojectedtoachievemarginsofapproximately106.39 [1]. - Management anticipates revenues to remain roughly unchanged in Q1 2025, with growth expected to return in the second half of 2025, particularly in the Space Systems segment, which is projected to achieve margins of approximately 10% for the year [2][4]. - Overall consolidated segment margins are expected to increase throughout 2025, with a forecasted margin expansion of about 10 basis points [3]. Group 2: Strategic Initiatives - The restructuring plan involves shifting the sustainment business from Defense Systems to Aeronautics Systems, which is expected to enhance margins and create synergies between the two segments [3]. - International expansion is gaining momentum, with Northrop Grumman forecasting double-digit revenue growth in foreign markets for 2025, outpacing domestic growth [4]. Group 3: Product Development - The B-21 program, which represents about 8% of 2025 sales, is expected to maintain strong political support, while discussions are ongoing regarding increasing the total order volume for the aircraft [5][8]. - The Sentinel program is anticipated to show steady growth in 2025, although it is expected to contribute less than 10% of total revenue [5][8]. Group 4: Market Outlook - Despite limited margin expansion in 2025, analysts believe Northrop Grumman is well-positioned for significant margin growth in 2026, with international sales potentially offering additional upside in 2026-2027 [7]. - The price forecast is based on a 20.5x multiple on the 2026 free cash flow estimate of approximately 3.45 billion [8].