Northrop Grumman (NOC) is a huge defense contractor that develops many types of products, including high tech systems used at sea, unmanned and manned aircraft, missiles, and artillery.

Impressively, the company had a huge, record backlog of $85 billion as of the end of the third quarter, while its bottom line climbed by an impressive amount in Q3. Further, the company increased its full-year financial guidance.

Also worth noting is that NOC stock has historically performed quite well, while its valuation is not excessive at all, and it has a significant dividend yield.

An Overview of Northrop Grumman’s Key Products

In the area of ocean-based offerings, Northrop manufactures multiple uncrewed systems, including a mine-hunting product and underwater vehicles.

One of the other cutting edge sea-based products offered by the firm is “ high-performance interferometric synthetic aperture sonar” which  enables uncrewed underwater vessels to travel longer distances.  Another system provides the military with an easier, safer means of “making electrical connections underwater.”  Finally, the U.S. Navy utilizes Northrop’s AN/SLQ-32 system. The latter offering provides America’s ships with “non-kinetic electronic attack options.”

When it comes to air-based products, Northrop markets crewed planes, including the B-2 stealth bomber and Hawkeye “battle management” aircraft” used by the Navy.  The company also sells a small, autonomous uncrewed aircraft called the Bat. Among the parts that Northrop manufactures for planes are wing products, fuselage parts, and engine components. Finally, the firm provides “countermeasures and sensors” for planes.

On the missile front, Northrop develops ICBMs, including the nuclear Sentinel weapon system. According to the company, Sentinel represents “a critical modernization of the ground-based leg of the U.S. nuclear triad,” The system is replacing the Minuteman III which was first deployed in the 1970s.

Northrop also markets missile defense systems. Finally, the contractor manufactures many types of “weapons and ammunition” that are utilized by artillery systems, tanks, and soldiers.

 Strong Q3 Financial Results

Last quarter, Northrop’s revenue climbed 2% versus the same period a year earlier to $10 billion, and the company expects its revenue to increase 5% in 2024. In Q3, NOC’s earnings per share advanced 13% year-over-year to $7, and, as I mentioned in the introduction to this article, its backlog came in at a record $85 billion.  Additionally, Northrop increased its 2024 adjusted EPS guidance to $25.65 to $26.05 from $24.90 to $25.30. The company’s operating income outlook also rose, climbing to $4.525 billion to $4.575 billion from $4.5 billion to $4.575 billion.

Historical Performance, Valuation, and Dividend

NOC stock has climbed 54% since December 1, 2017, and it is up 60% since the end of 2020.

Turning to valuation, the shares have a forward price-earnings ratio of 18.6 times. That’s well below the median for the Aerospace and Defense sector of 24.3 times. And the stock’s current PEG ratio, a measure of valuation that takes into account a firm’s expected growth, is just 0.62, way under the sector median of 2. Making NOC stock even more attractive is its significant forward dividend yield of 1.7%.

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Larry Ramer has been a business news writer for nearly 20 years. He has been employed by The Fly, The Jerusalem Post, and Israel's largest business newspaper, Globes, and is currently a freelance editor and columnist for InvestorPlace.