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Northrop Grumman Undervalued

Northrop Grumman (NOC) is one of the most prominent US aerospace and defense contractors based on revenue. The stock is rarely undervalued. However, as a group, defense stock prices plunged after reporting third-quarter earnings. There were two reasons for this: industry-wide headwinds and company-specific challenges. Northrop Grumman was no exception, and the stock price is down more than (-10%) and in correction territory. It may now be a good time for retail investors to dig deeper into this defense giant. There is a lot to like in Northrop Grumman. The company is a market leader in manned and unmanned strategic aircraft resulting in a wide moat. The dividend has been raised for 18 consecutive years, making the stocks a Dividend Contender. Furthermore, Northrop Grumman is undervalued and a buy.

Overview of Northrop Grumman

Northrop Grumman is a large defense contractor in the US founded in 1939. The company operates in four business segments: Aeronautics Systems (aircraft and UAVs), Mission Systems (radars, sensors, and surveillance and targeting systems), Defense Systems (sustainment and modernization, directed energy, and tactical weapons), and Space Systems (missile defense, space systems, hypersonics and space launchers). Northrop Grumman acquired Orbital ATK in 2018. This acquisition was followed by divesting the IT Services business in 2021. Northrop Grumman’s primary platforms are the B-2 Spirit, E-2D, E-8C, RQ-4 Global Hawk, MQ-4C Triton, MQ-8B/C Fire Scout, and other platforms. The company also makes missiles, missile defense systems and has a significant presence in classified systems. The company also provides content for the F-35 and F/A-18. In addition, Northrop Grumman won the contract for the B-21 Raider. Due to the type of platforms and systems that Northrop Grumman makes, most sales are to the US Air Force, US Navy, and classified. Revenue was about $36.8B in 2020 and $37.2B in the LTM.


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Prakash Kolli is the founder of the Dividend Power site. He is a self-taught investor, analyst, and writer on dividend growth stocks and financial independence. His writings can be found on Seeking Alpha, InvestorPlace, Business Insider, Nasdaq, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, and leading financial sites. In addition, he is part of the Portfolio Insight and Sure Dividend teams. He was recently in the top 1.0% and 100 (73 out of over 13,450) financial bloggers, as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.

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