In accordance with previous assertions by DHI (DHI, which owns ClearanceJobs) CEO Art Zeile, Northrop Grumman’s (NOC) B-21 bomber and Sentinel programs are performing well. Moreover, the Street appears to be becoming meaningfully more bullish on the defense manufacturer’s name. The company reported excellent third-quarter financial results and provided commendable guidance. Importantly, NOC has multiple other growth drivers that should kick in within the next year or two, and NOC’s valuation remains quite low and attractive.
The B21 and Sentinel Are Making Good Progress
Speaking on NOC’s Q3 earnings call, held on October 20, CEO Kathy Warden indicated that the “testing and production” of B-21 would boost the company’s 2027 financial results. Further, CFO John Greene noted that increased revenue from the bomber had contributed materially to its Q3 revenue.
As far as the Sentinel, Warden noted that “all aspects of the program are progressing as planned,” explaining that it is “a key growth driver this year and throughout the 2030s.”
In January, in an article entitled “Top defense stocks profiting from our trillion dollar budget,” Zeile noted that “the Pentagon’s budget calls for over $4 billion to be spent on Northrop’s B-21 Raider stealth bomber. It also seeks $4.1 billion for R&D related to the company’s Sentinel intercontinental ballistic missile (ICBM) program.” In his column, Northrop stock was included under the heading “Defense stocks to watch.”
The Street Is Becoming More Bullish After Strong Results, Guidance
Investment bank Baird responded by raising its rating on NOC stock to Outperform from Market Perform, citing cost controls and an improved outlook for the B-21 program. Specifically, Baird believes that the chances of the company taking a major charge related to the bomber have dropped.
Multiple Other Growth Drivers and an Attractive Valuation
Amid widespread demand by militaries for affordable defenses against drones, Northrop is seeing significant demand for Raid Hunter, which Warden called “a cost-effective product line that is designed to close a critical short-range defense gap as drone swarms.” The CEO reported that the company is “receiving clear demand signals for Raid Hunter from key allies and expects it to drive incremental growth for an already rapidly growing Defense Systems portfolio.” She noted that Raid Hunter is a “gun-based air defense system.”
Additionally, Talon Blue, NOC’s autonomous airplane, completed its first fully autonomous flight, handling taxi, takeoff, flight maneuvers, and landing on its own. Warden suggested that the demand for the aircraft will be strong.
Despite NOC’s strong Q3 results and guidance, along with multiple powerful catalysts, NOC stock is trading at a low forward P/E of 17.
*This article is intended to be informational only; it is not financial advice.
