April 10, 2018

NOC – Market expectations are for all-time high Uniform ROA, but management has concerns about margins, income, and sales


      • Northrop Grumman Corporation (NOC:USA)currently trades near recent highs relative to UAFRS-based (Uniform) Earnings, with a 26.8x Uniform P/E, implying bullish expectations for the firm. However, management has concerns about margins, income, and sales
      • Specifically, management may have concerns about lower margins as a result of greater cost-plus development contracts, and may be downplaying concerns about their cash generation in Q4. Additionally, they may lack confidence in the sustainability of operating income growth in their Aerospace Systems business, and may be downplaying concerns about the sustainability of sales improvements going forward, particularly in their Mission Systems and Technology Services segments

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