Northrop Grumman Corporation

Northrop had a disappointing quarterly result and it failed to meet Wall Street expectations with respect to revenues as well as earnings. The company is facing various supply-side pressures and operating a tight labor market. However, the demand environment is still pretty strong, with great awards and backlog growth driven by alignment with their clients’ top priorities, laying the groundwork for long-term success. The company has onboarded over $13 billion worth of clients recently including a few significant awards, such as the most recent F-35 block in their aeronautics business. The management expects to generate greater cash flows in the coming quarter due to the seasonality of their receipts and payments. In addition, to overcome lingering timing challenges and meet their projection, Northrop intends to maintain its attention on execution and pursue further working capital reductions. Overall, we are neutral about its future growth and, thus, maintain our ‘Hold’ rating with a revised target price.