NEW YORK (TheStreet) -- Northrop Grumman (NOC - Get Report) shares are up 1% to $128.50 on Tuesday after being upgraded to "outperform" from "sector perform" with a $148 price target by analysts at RBC Capital.
The firm believes that the defense contractor can expand its margins now that the budget problems that had been plaguing the company appear to have dissipated.
TheStreet Ratings team rates NORTHROP GRUMMAN CORP as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:
"We rate NORTHROP GRUMMAN CORP (NOC) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 36.50% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, NOC should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- NORTHROP GRUMMAN CORP has improved earnings per share by 15.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, NORTHROP GRUMMAN CORP increased its bottom line by earning $8.34 versus $7.80 in the prior year. This year, the market expects an improvement in earnings ($9.39 versus $8.34).
- The current debt-to-equity ratio, 0.58, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.25, which illustrates the ability to avoid short-term cash problems.
- Net operating cash flow has significantly increased by 74.39% to $572.00 million when compared to the same quarter last year. In addition, NORTHROP GRUMMAN CORP has also vastly surpassed the industry average cash flow growth rate of -19.61%.
- You can view the full analysis from the report here: NOC Ratings Report
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